Blue Shield of California rescinds rate hike

Blue Shield of California has rescinded its plan to raise premiums on its individual policyholders for the third time in the past seven months, raising questions as to how its competitors will proceed with similar rate hikes, reports the New York Times and Los Angeles Times.

The San Francisco-based Blue Shield, a not-for-profit carrier, announced on Wednesday that it would not impose an average 6.5 percent rate hike on its nearly 194,000 individual policyholders effective May 1, and would not impose any more increases during 2011. That planned increase was on top of other hikes Blue Shield imposed in January and October.

"By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times. It's a financial risk for us, but a risk that's worth taking," said Blue Shield CEO Bruce Bodaken.

Although an outside auditor had concluded that Blue Shield's rate hike was actuarially justified, the insurer had come under intense pressure from consumer groups and California Insurance Commissioner Dave Jones to cancel the increases. Although the three hikes in recent months raised premiums an average of 30 percent, some policyholders saw increases approaching 90 percent.

Blue Shield, which claims it loses money on individual policies, projects the move will save policyholders between $35 and $40 million in 2011.

To learn more:
- read the New York Times piece
- here's the Los Angeles Times article 

Related Content:
Blue Shield of California wins rescission ruling
Blue Shield of California wants 59 percent rate hike; State wants a delay
Rate hikes are reasonable, says Blue Shield of California