Calif. Finds Error in Anthem Blue Cross Rate Filing, Rate Filing Withdrawn

April 30, 2010

The California Department of Insurance announced it has uncovered substantial errors in Anthem Blue Cross’ January rate filing, causing the company to withdraw the filing.

In January, the company filed for a rate increase of up to 39 percent for some consumers — a decision that attracted much criticism and a review by the DOI. The company had agreed to postpone its rate increase until May 1.

“Because I was highly skeptical of the rate increase, I ordered an outside review to ensure that Anthem’s filing complied with state law,” Insurance Commissioner Steve Poizer said. “Anthem agreed to delay their increase pending this review. The independent actuarial analysis found numerous and substantial errors in their filing that would have led to massive and unjustified rate increases. We notified Anthem of these errors and they admitted to the mistakes.”

The independent, outside actuarial analysis was performed by Axene Health Partners LLC. The report was conducted over a 10-week period and required 500 hours of work by four licensed actuaries. The summary of the review is is available from the DOI, and the entire report is expected to be completed next week.

Based upon a thorough review of Anthem’s calculations, Axene found numerous errors in the methodology used by Anthem to project total lifetime loss ratios. Correcting these errors resulted in lower lifetime loss ratios than initially calculated by Anthem.

The errors identified included:

  1. Double counting of aging in the calculation of underlying medical trend for the projection of total lifetime loss ratio.
  2. Anthem overstated the initial medical trend used to project claims for September 2009 for known risk factors.

Both of these errors are errors of math and not differences in actuarial opinion.

Anthem has said it will resubmit its rate filing.

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