Connecticut-based Aetna Life Insurance Co. has raised its health insurance premiums on small employers with 73,000 members an average 30.3 percent over two years, which the California Department of Insurance on Thursday called "unreasonable."
It is the state's first-ever such finding, but the state has no power to block the increase.
Aetna Life Insurance Co. has raised its health insurance rates on small employers as of April 1.
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The latest increase effective April 1 is an average 8 percent annually with a 30.3 percent hike over 24 months for small employers with Aetna's PPO health insurance policies.
The department found that Aetna made projections about medical cost increases higher than the U.S. Bureau of Labor's medical cost inflation index and unsupported by Aetna's actual claims experience.
Aetna released the following statement:
"While rate increases are never easy, our rates are based on actuarially sound data and reasonable projection of future cost, which will impact approximately 16,000 customers.? Our Medical Loss Ratio is at 86.7%, which is higher than any of the filed rates by our competitors. Medical loss ratio is the percentage of health insurance premiums that insurers use to provide health care to their customers."
The Department of Insurance requested that Aetna postpone its April 1 rate increase, but the company implemented it anyway.
In making its finding, the Department. of Insurance noted that the Aetna subsidiary that sells health insurance in California made a 27.7 percent profit in 2011 and paid $1.7 billion in dividends to its parent company.
Aetna has paid dividends to its parent company in each of the past four years, the department noted. It paid $1.9 billion in 2010, $147 million in 2009 and $675 million in 2008.
Click here to read Aetna's filing, which is posted on the California Dept. of Insurance website.
California Insurance Commissioner Dave Jones said, "I am disappointed that Aetna has decided to reject my request to refrain from its latest health insurance rate increases on small employers... (who) are struggling in this economy and should not be hit with a 30 percent increase in just 25 months for health insurance for their employees."
Contact the writer: 714-796-7927 or jnorman@ocregister.com
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