Aetna’s 21% rate hike amounts to ‘price gouging,’ California regulator says

California’s managed-care regulator slammed health insurance giant Aetna Inc. on Thursday for “price gouging” after it raised rates on small employers by 21%.

This marked the fourth time since 2013 that California officials have found Aetna’s premium increases on small businesses unreasonable.

Aetna, the nation’s third-largest health insurer, is raising rates by 21%, on average, for about 13,000 people covered by small employers. This change in premiums took effect July 1.

Shelley Rouillard, director of the California Department of Managed Health Care, said an Aetna executive rejected her request this week to lower the rates.

“Aetna’s pattern of unreasonable increases equates to price gouging in today’s market,” Rouillard said. “I strongly encourage small employers subjected to these unreasonable rate increases to explore more affordable health coverage options.”

Aetna just announced a $37-billion acquisition of rival Humana Inc.

That deal is part of an industrywide consolidation wave that has prompted concerns that reduced competition will further drive up rates for consumers and employers.

Anthem Inc., the nation’s second-largest health insurer, has been in negotiations to buy Cigna Corp., and Woodland Hills insurer Health Net Inc. agreed to be acquired this month by Centene Corp. for $6.8 billion.

Rouillard said she worries that mergers will reward investors at the expense of consumers.

“I do have concerns about the merger mania that is occurring right now,” she said. “When companies merge, prices tend to go up.”

Health insurers and some industry experts say consolidation could be beneficial if big health plans use their market clout to win lower prices from hospitals and drugmakers and pass along those savings.

Aetna said its latest rate increase in California was warranted based on past and projected medical costs for employers.

The Hartford, Conn., company said the unit cost for a physician visit in California has increased 8% in the past year and prescription drug costs have jumped 17%.

“While rate increases are never easy, our rates are based on actuarially sound data and a reasonable projection of future cost,” a company spokeswoman said. “We are making every effort to maintain an affordable array of products.”

Rouillard disputed Aetna’s projections, saying data show that customers’ use of medical care has declined during the past two years. She said the company has also failed to provide adequate documentation to justify the increase.

Overall, the managed-care agency has found six rate increases unreasonable since 2011, and four of them were from Aetna.

In May, the regulator found Aetna’s 19.2% increase for small employers unreasonable.

But California officials have no power to stop health insurance rate increases.

Voters last year soundly rejected Proposition 45, which would have enabled regulators to block rate hikes that were deemed unreasonable in the individual and small employer markets.

Twitter: @chadterhune