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Calif. regulators say health insurance increase unreasonable; Anthem Blue Cross says not so Posted: May 2nd, 2011

By Maryalene LaPonsie

On May 1, health insurance rates for 120,000 Anthem Blue Cross customers in California were raised despite the fact that a similar increase for other subscribers was delayed. Now, the California Department of Managed Health Care (DMHC) says the health insurer's uneven treatment of its customers makes the May 1 increase unreasonable.

Because of how certain health insurance products are classified, some Anthem Blue Cross PPO plans are regulated by the California Department of Insurance (CDI) while others fall under the jurisdiction of the DMHC. After being asked by California Insurance Commissioner Dave Jones, Anthem Blue Cross agreed to delay its planned rate hike for policies under the jurisdiction of the CDI and also reduce the increase amount.

Blue Cross square off with DMHC

In April, the DMHC sent a letter to the health insurance company asking why a reduction was granted to members in DCI plans but not to those enrolled in similar PPOs under the jurisdiction of DMHC. In its response, Anthem Blue Cross notes that its medical loss ratio - the amount it spends on medical care in relation to the amount it receives from premiums - meets federal requirements. The company also said that the term "unreasonable" is not defined in law, and it declined to delay or reduce the May 1 health insurance rate hike.

After receiving the insurer's decision, the DMHC declared the health insurance rate increase to be unreasonable. The statement marked the first time a California state department had made such a determination. However, California law does not give the department the ability to block the increase from going into effect.