WellPoint seeks new, smaller California rate hike

* New request seeks average 14 pct increase

* WellPoint said now expects to lose money on the business

* Shares off 1 percent

By Lewis Krauskopf

NEW YORK, July 1 (Reuters) - Health insurer WellPoint Inc (WLP.N) has filed for a 14 percent average premium rate increase for its individual plans in California, after it pulled its initial request when errors were found.

WellPoint's initial rate request for an average 25 percent increase for about 600,000 policyholders drew heavy criticism earlier this year from Democrats as they rallied support for the recently passed U.S. healthcare reform law.

The largest U.S. health insurer by membership said on Thursday it regretted the "inadvertent" errors in the initial filing, which was discovered by an independent actuarial analysis requested by California Insurance Commissioner Steve Poizner.

WellPoint's Anthem Blue Cross unit corrected the errors in the latest filing, the company said. But it said with this filing it expects to lose money on its individual business in California in 2010, with current estimates putting the 2010 loss at more than $100 million.

"While the filed rates will not cover our costs, given the current environment, and to avoid further destabilization of the California individual block of business, a compromise is in the best interest of all rather than continuing to experience a delay in obtaining any rate increase," the company said in a statement.

Aetna Inc (AET.N) also has resubmitted its rate request for its 65,000 policyholders in the most populous U.S. state after errors were found in its initial request. However, Aetna kept its request of a nearly 19 percent increase on average, saying the error did not affect its rate.

With its new rate, Aetna expects a loss of $7 million before taxes for 2010. The No. 3 U.S. health insurer said because of the delay implementing the rate, the effective increase would be 15.6 percent.

Commissioner Poizner said his department would analyze the new filings "with a fine tooth comb."

"This process, which has already caused two rate filings to be withdrawn due to the discovery of significant math errors, will protect consumers by ensuring that insurers spend 70 percent of premiums on medical benefits, as required by state law," Poizner said in a statement.

State rate filings have come under greater scrutiny across the country. President Barack Obama warned insurers last week not to use the recently passed healthcare overhaul as a opportunity to push through big rate increases.

The new California rates for WellPoint equate to an earnings hit of about 14 cents per share, Sanford Bernstein analyst Ana Gupte said in a research note.

Gupte said WellPoint has been conservative in its full-year profit forecast of at least $6 per share and that she did not expect the company to cut its forecast.

"The resolution of the fabled rate debate with WellPoint in California is a step in the right direction given it puts an end to some of the sector uncertainty," Gupte said.

WellPoint shares were down 48 cents to $48.45 shortly after the opening bell on the New York Stock Exchange. (Reporting by Lewis Krauskopf; Editing by Derek Caney)