California commissioner wants authority over rate hikes
As Blue Shield of California bent to strong political and public opposition in announcing that it won't increase premium rates for its individual or family-plan members, Insurance Commissioner Dave Jones used the opportunity to again appeal for regulatory authority over health insurance rates in the state.
Saying he was "pleased" with Blue Shield's decision, Jones again appealed for the power to reject excessive rate hikes. "In California, unlike in 20 other states, health insurers get to decide whether to increase health insurance rates without approval from the insurance regulator, just as Blue Shield raised rates two times and proposed to raise rates yet a third time," Jones said. He wants the California General Assembly to pass a bill that would empower the insurance commissioner to reject "excessive rate hikes," reports the Insurance and Financial Advisor.
Jones also urged other insurers in the state to take similar action. "My hope is that all three of the other insurers will look at what Blue Shield did and hopefully follow suit," Jones told the Wall Street Journal.
Although Blue Shield decided not to raise rates this year, CEO Bruce Bodaken said it's a "financial risk." He added that the proposed 2011 individual rates were reasonable and would have led to the company losing some money on the policies, reports National Underwriter.
The organization lost $27 million on individual coverage last year and had expected additional losses in 2011 even with the now-withdrawn increases. However, individual policyholders will save $35 million to $40 million this year as a result of its decision, according to the WSJ.
Insurance premiums sought by Blue Shield in recent months would have driven total increases as high as 86.5 percent for thousands of individual policyholders. The insurer already increased rates in October and January. If its third planned increase had taken effect, some customers would have faced cumulative hikes ranging between a 50 to 80 percent increase, reports the Los Angeles Times.
Tom Epstein, Blue Shield spokesperson, said it underpriced some of its individual health plans, leaving the company without enough revenue to cover the cost of medical care for members. As a result, the insurer had to raise premiums substantially on its money-losing products. "Projecting losses is an inexact science," Epstein told the Times. "If you get it wrong, you have to fix it. Each product needs to have a balance of revenue and medical expenses for it to be viable."
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