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Calif. Regulator: Blue Cross Rate Hike Unreasonable

SACRAMENTO (CBS / AP) -- Double-digit rate hikes for 120,000 Anthem Blue Cross health insurance policyholders will take effect Sunday despite a state regulator's determination the increase is unreasonable.

A California Department of Managed Health Care review found the increases were 3 percent to 4 percent higher than individual plans with similar benefits under the jurisdiction of the state's other insurance regulator, the Department of Insurance.

"In the spirit of providing maximum transparency to consumers about rate increases, we have little choice but to publicly express our disappointment that Anthem Blue Cross didn't lower the rates as we requested," Department of Managed Health Care spokeswoman Lynne Randolph said in a statement.

The hikes will average almost 15 percent, and Friday's declaration of disappointment marks the first time a rate was declared unreasonable by DMHC, the nation's only regulator solely dedicated to health maintenance organizations. The department oversees policies for 21 million Californians.

In a statement, Anthem spokeswoman Kristin Binns said the regulator appeared to have changed its mind from a March 3 assessment that found the increase was not unreasonable or unjustified.

Binns also disputed DMHC's claim that Anthem's DMHC-regulated plans are similar to those regulated by the Department of Insurance.

"We are disappointed by this public announcement that contradicts the department's action on Anthem's rate filing for those products, and to which Anthem had no opportunity to respond," Binns said.

Both insurance regulators in California lack the power to reject rate hikes — a right regulators in 35 other states have. But that could change if California lawmakers approve a new bill that would vastly expand the powers.

DMHC noted that it sent a letter to Anthem on April 7 to follow up and ask why holders of policies regulated by DMHC were paying more for the policies similar to those regulated by the Department of Insurance.

That same day, the Santa Monica-based advocacy group Consumer Watchdog wrote a letter to Gov. Jerry Brown asking for more consistent oversight of Anthem's rate hikes between the regulators.

"When a regulator finds that a rate hike is unreasonable but can't do anything about it, we obviously need more regulation," Doug Heller, the group's executive director, said of Friday's announcement. "If the only consumer protection is the ability of a regulator to be disappointed, then we have no protection at all."

AB52 was sent to the Assembly appropriations committee last week, with a hearing expected sometime in May, according to Department of Insurance Deputy Commissioner Janice Rocco.

Three previous attempts to pass rate rejection authority in California have failed.

The legislation is opposed by the insurance industry, as represented by the California Association of Health Plans, which says it will be expensive to implement.

"AB 52 offers no relief to the underlying cost pressures that are driving up the cost of health care, which drive up the price of health insurance," said association president and CEO Patrick Johnston.

The California Medical Association and the California Hospitals Association are among other opponents of the bill.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)

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