California Insurance Commissioner Dave Jones yesterday said a recent rate submission by Anthem Blue Cross was "unreasonable" and took particular issue with Anthem's plans to charge a reinsurance fee which Jones said forces small businesses to pay for a 2014 fee a year early, in 2013.
Anthem Blue Cross officials said Jones' numbers are off and that the reinsurance fee is a benign and standard business practice which has been used for many years without complaints from government or advocates.
"I've concluded that the rate increase imposed by Anthem Blue Cross on its small employers customers is unreasonable," Jones said. He said the average rate increase of 10.6% is not justified given the data submitted to the Department of Insurance by Anthem.
Anthem's public relations director Darrell Ng said the math used by Jones doesn't add up even in the most basic identification of the level of rate increase.
"We disagree with the commissioner's number of 10.6%," Ng said. "We think it's 7.5%, and that's what we submitted. We're not sure where the commissioner got his 10% number."
Anthem and Jones also disagree on a reinsurance fee related to the Affordable Care Act. The ACA requires health insurers to pay a "transitional reinsurance fee" to help cover the cost of running a three-year reinsurance program designed to protect insurers from increased risks associated with the new law.
Jones said Anthem is passing on that charge to small employers a year too early.
"They're trying to impose a fee in 2013 that could happen in 2014, and I don't think that's fair," Jones said in an earlier interview. "It's not fair to small businesses and consumers to pay now for something they may or may not even have to pay for in 2014."
Ng said small employers, who sign a 12-month contract, are only paying the reinsurance fee for the months they're covered into 2014. For instance, if an employer signs up for a one-year contract at the end of January, then that contract will include just one month's worth of the 2014 reinsurance fee.
"It's consistent with how we add in other things," Ng said, such as a Legislature-imposed mandate to include a particular type of care, like autism. The mandate costs, or in this case the 2014 ACA fee, are charged to small employers for the months of the contract where those costs are assessed -- it's just that they're included in the overall cost and then prorated over the 12-month period, Ng said.
"That's true for any mid-year change, not just the ACA fee," Ng said. "If you renew in March, then you have three months [of the reinsurance fee] prorated over the life of the contract."
The reinsurance issue is simpler than that, Jones said yesterday.
"I've concluded," Jones said, "that health insurers should not charge small businesses fees in 2013 that are only going to be collected by the federal government in 2014."