Anthem Blue Cross is dropping its plan to raise health insurance premiums for some California customers by as much as 39 percent, citing errors in its previous calculations.
The rate increase would have affected thousands of Californians who buy individual coverage. The potential increases became a major talking point for President Obama and lawmakers in Washington who favored the health care overhaul.
California law requires at least 70 percent of every premium dollar to be spent on medical care. The California department of Insurance investigated to find out if the proposed rate increases were justified and found that there were "numerous and substantial errors in Anthem's request."
Anthem said it had made "inadvertent miscalculations" when it said it needed increases as high as 39 percent. The company plans to revise its rate request as soon as possible. But the new rate proposal will have to comply with the new health care law. That requires insurers to spend at least 80 percent of premiums on medical care.
Anthem notified many policyholders in January that the rate increases would go into effect March 1 but subsequently announced a delay amid public outcry.
"By refiling our individual rate requests, we will also utilize updated and real-time medical utilization information, as well as address inadvertent miscalculations related to the way in which we estimated our future medical costs in our initial filings," the company said in a news release.
Policyholders will be notified of the revised rate adjustments at least 30 days before the changes go into effect, and current rates will remain unchanged until then, Anthem said.
Anthem's parent WellPoint Inc. of Indianapolis announced this week that it will comply ahead of schedule with the health care reform provision that limits cases in which insurers can cancel coverage when a customer gets sick.
WellPoint operates Blue Cross Blue Shield plans in 14 states. Anthem Blue Cross is the trade name of Blue Cross of California.
The withdrawn rate increases also include those of Anthem Blue Cross Life and Health Insurance Co.
Material from The Associated Press was used in this report.