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Blue Shield of California now faces pressure to lower premiums

Embattled insurer could tap reserves to lower prices, critics say

After losing its tax-exempt status in the state of California and spending more than $1.2 billion to acquire a Medicaid managed care plan, Blue Shield of California now faces a debate over its premiums, reported the Los Angeles Times.  

Plans with the San Francisco-based nonprofit insurer's prices cost as much or more than those offered by its for-profit rivals, according to a review of rates and interviews with insurance agents and officials, noted the Times. Since 2013, state regulators found three Blue Shield rate increases to be unreasonable, according to the article. 

However, because California voters rejected a ballot measure last year that would decide whether the state insurance commissioner can reject insurers' rate hike proposals--an initiative which Blue Shield and other insurers in the state spent $13.8 million to defeat--state regulators are unable to deny rate increases. 

The tax-exempt status debacle has sparked debate regarding Blue Shield's mission.

"Blue Shield could adjust their premiums lower than for-profit companies and make that one way to fulfill their public mission," Glenn Melnick, a healthcare economist and professor at the University of Southern California, told the Times. "That could stimulate more price competition across the market."

Blue Shield stands by its prices, stating its rates are appropriate and reflect the rising cost of medical care. The insurer refuses to tap into its financial reserves of some $4.2 billion to lower premiums, the article said, saying such a move would send the wrong message to providers about controlling spending.

"Blue Shield could reduce their rates with those huge reserves," Bruce Jugan, a Montebello insurance agent, told the paper. "That would have a major impact on the market and you'd start to see downward pressure on prices, which is what everybody wants."

Blue Shield raised premiums an average of 6 percent this year on the state's exchange, Covered California, according to the article. Meanwhile, family premiums for the insurer's most popular HMO are 12 percent more expensive than for-profit competitors Anthem and Kaiser Permanente's best-selling plans among California Public Employees' Retirement System members.

For more:
- here's the Los Angeles Times article

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Rate regulation on 2014 ballot in California
WellPoint, insurers spend millions to stop rate hike justification