California Blue Shield to raise some individual policy rate by 59 percent

SAN FRANCISCO – In early January, Blue Shield of California proposed rate hikes for nearly 200,000 individual policy holders that would see some members' premiums jump as much as 59 percent on March 1.

While other insurers have used the health reform law as partial justification for large rate increases, Blue Shield officials were clear to note that reform did not play significantly in the need for the increase.

"These rates reflect trends that were building long before health reform," the company said in a prepared statement. "Our individual market medical costs are rising rapidly due to higher provider prices, increased utilization and the fact that healthier people are dropping coverage during a bad economy."

In response, California Insurance Commissioner Dave Jones asked Blue Shield and all other major insurers in the state to delay any rate increases for 60 days beyond their planned effective date to allow his office time to examine the proposed increases. Blue Shield was the last company in the state to abide by that request.

"I had only been sworn in for literally 72 hours when news broke about Blue Shield and other health insurers' rate hikes," said Jones. "I wanted to make sure I had time to review those rate hikes as I believe the people of California want me to do."

Jones pointed to a new law passed in California last year that requires all health insurance companies filing for rate increases to also file a third-party actuarial review of their proposals with the Department of Insurance. Days after announcing its planned increases, Blue Shield of California announced it had retained Axene Partners for that review, and that it would offer refunds if it was found their increases were unjustified – a move the company called "unprecedented."

"We regret that our members have received significant rate increases in recent months and want to be absolutely certain that the rates reflect our actual cost of providing medical care," said Bruce Bodaken, Blue Shield's chairman and CEO.

Jones said the new law doesn't go far enough. While a voluntary review of proposed 39 percent rate increases last year by Anthem Blue Cross found significant errors that eventually led Anthem to lower its increase request, the state's insurance commissioner doesn't have the power to reject excessive hikes.

"Independent review is intended to provide more transparency in the request for rate hikes," Jones said. "Unfortunately, the law does not give me the right to reject rate increases that are excessive."

It's a power that Jones had sought for years before being elected to his current post. On three separate occasions while serving in the California Assembly, he authored legislation that would give the insurance commissioner the ability to reject health insurance increases deemed excessive, a power the office has held since 1988 for auto, homeowner and casualty insurance.

With Jones now at the Department of Insurance, California Assemblyman Michael Fuer has taken up the cause and is writing a bill to extend the power to the commissioner to reject proposed health insurance rate increases.

"This rate increase by Blue Shield came as a shock and is poorly timed as many are still affected by the recession," said Fuer. "I think that the discovery of significant errors last year by Anthem Blue Cross when they proposed their big increase demonstrates that it is important to give the insurance commissioner to ability to reject excessive increases."