Virginia orders rate cuts for Aflac policies

One of the nation's biggest health and life insurance firms has been overcharging Virginians for its accident, dread disease and other supplemental health policies, a State Corporation Commission Bureau of Insurance review found.

As a result, Aflac — also known as American Family Life Assurance Co. — is cutting premium rates on 16 different policies by as much as 35%, its filings with the bureau show.

The cuts will save more than 120,000 Virginia policyholders some $12.6 million a year, the filings show.

In addition, Aflac agreed to pay a $64,000 fine to settle the matter.

"This represents exactly the type of oversight work the Bureau of Insurance does every day to protect Virginia consumers," said Scott White, commissioner of the bureau.

"When we discovered these supplemental health products weren't delivering the value policyholders were paying for, we acted to secure premium rate reductions that resulted in real savings to them," he said.

It started with one of the regular market analysis reviews that the bureau staff conducts to see how insurers do business.

In the review, bureau staff checked six specific Aflac policies that offered supplement coverage when policyholders suffer injuries from accidents, need cardiac care or need to pay a hospital bill.

They found four of the six policies they reviewed weren't meeting a basic test of fair pricing.

The percentage of premium income Aflac was paying out in claims was low.

That percentage, claims divided by premiums, is called the loss ratio. When it is too low, regulators say it means premiums are too high.

As they asked Aflac about this, bureau staff found a total of 16 supplemental policies had loss ratios well below the minimum required. In addition to the four policies, there were other policies offering similar coverage, as well as policies offering dental, vision and short-term disability benefits. When policies pay less than a minimum loss ratio, it means premiums are too high.

In Virginia, these sorts of policies are supposed to have loss ratios of at least 50%. Less than half of the money Aflac collected from policyholders was used to pay claims.

Most had been running loss ratios averaging between 30% and 35% since 2019, a Richmond Times-Dispatch review of Aflac rate filings found.

In one year, the loss ratio on one so-called dread disease policy, covering organ transplants, heart attacks, strokes and coma, was as low as 14% and averaged 23% from 2019 through 2024. A vision policy's loss ratio was just 18% one year, and a dental policy that more than 3,300 Virginians bought, it ranged from 23% to 24% for three years.

Aflac cut the dread disease premiums by 35%, bringing them down to an average of $159 a year. It cut the dental and vision policies' rates by 20%.

Loss ratios on such supplemental health policies are the lowest set in state law or regulation. Affordable Care Act policies must be priced to produce at least an 80% loss ratio, as is the case for long-term care insurance. Medicare supplement coverage has to have at least a 65% loss ratio.

Aflac Senior Vice President Thomas McDaniel said the company is cutting premium rates and paying the fine "solely for the purpose of a settlement and does not constitute, nor should it be construed as, an admission of any violation of law."

In a statement, the company added: "As a leading supplemental insurer in the United States, we are committed to ensuring that our policyholders receive the benefits for which they are entitled. We continue to work with state regulators to ensure all standards are met."

Dave Ress (804) 649-6948 dress@timesdispatch.com