Sacramento and Washington are abuzz over Blue Shield of California’s announcement today that it’s withdrawing its plan for a May 1 increase in health insurance rates for individual policyholders.
It would’ve been the third such rate hike since October; the three hikes combined would have raised rates by as much as 87 percent for some of its 200,000 policyholders, according to the California Department of Insurance. San Francisco-based Blue Shield has said rising health care costs forced the previous rate hikes; it said it lost $27 million on individual policies last year and expects more such losses this year. The cancelled increase will save members about $35 million to $40 million in added premiums.
Health-care affordability advocates say federal and state health-care reform laws are responsible for the insurer backing down.
“This latest withdrawal by Blue Shield shows that scrutiny matters. The new spotlight on rising health insurance rates, placed by the new federal health law and aggressive implementation at the state level, is having an impact of saving consumers money,” Health Access California Executive Director Anthony Wright said in a news release.
But while the Department of Managed Health Care and the California Department of Insurance now have the authority to review whether or not proposed rate increases are excessive, unjustified or unfairly discriminatory, neither department has the authority to reject such an increase.
“This is the third insurer that has withdrawn or reduced rates as a result of additional scrutiny and requests that they justify those rates. New federal and state laws now make these rate hikes public, but we need to take the next step, to pass the rate regulation bill now pending in the California legislature,” he said. “Blue Shield says they want a focus on the medical costs driving health care costs – but that’s what rate review and regulation would help do.”
And that’s what California Insurance Commissioner Dave Jones says he’s intent on doing. He wants to bring California in line with the 20 states in which insurance regulators have authority not only to review rate hikes but to reject the excessive ones; he has sponsored AB 52, carried by Assemblyman Mike Feuer, D-Los Angeles, to give that authority to his office and the DMHC. (Actually, the bill right now just declares the Legislature’s intent to make such a change, but I hear it’ll be amended in the next few days so that it would actually do the deed.)
Jones issued a news release today saying he appreciates Blue Shield’s support of the federal Patient Protection and Affordable Care Act enacted last year, and of the health benefits exchange California is moving to enact under it by 2014. The law lets the Insurance Commissioner recommend which insurers will be allowed to sell insurance in this exchange, and “Blue Shield’s decision to refrain from a third rate increase is certainly consistent with their desire to participate,” Jones said.
“But one of the missing pieces of the federal healthcare reform is the authority to reject excessive rate hikes,” he added. “Today’s news is a welcome development and certainly a relief for several hundred thousand of Blue Shield policyholders in California, but it reminds us all that insurance companies hold all the cards when it comes to setting rates. Blue Shield policyholders still had to pay the first two rate increases. Those with health insurance are at the mercy of insurance company decisions to raise rates multiple times each year. That’s why we need to pass Assembly Bill 52.”
Feuer issued a statement today too, saying “(f)amilies and businesses should not have to depend on the whim of an insurance company to halt a major rate increase. Without a robust rate approval process in place, Californians will continue to experience these outrageous increases.”
Members of Congress were quick to weigh in on today’s developments as well.
Rep. George Miller, D-Martinez, the House Education and the Workforce Committee’s ranking Democrat, issued a statement calling Blue Shield’s withdrawal of its premium increase “good news for Californians who faced losing their insurance because of this rate hike. While California families are still suffering from the recession, they shouldn’t also have to worry about yet another hit to their pocketbooks.”
And Rep. Pete Stark, D-Fremont, the Ways and Means Health Subcommittee’s ranking Democrat, said Blue Shield is putting its money where its mouth is. “As one of the few insurers that has worked collaboratively toward health care reform, today’s actions show that its not just talk – they’re willing to put their money behind their words. I commend them for taking this action. While other insurers may be less willing to make moves like this voluntarily, the good news is that the tools enacted in the new health reform law will force them to be more honest and forthcoming.”