Jones, Blue Shield Tangle Once Again
As Blue Shield of California systematically shifts its individual health plans away from regulation by the Department of Insurance to the Department of Managed Health Care, it has continued to ratchet up premiums for those who remain under the former's jurisdiction.
Those 81,000 policyholders were notified last fall of a 9.8% average rate increase that went into effect on Jan. 1. The rate hike was denounced earlier this week by California Insurance Commissioner Dave Jones.
According to Jones, these policyholders had their premiums hiked an average of 22.6% over the past year and 32.3% over the last two years. Blue Shield contends that the increase is actually smaller, but is still more than 29%.
“The cumulative financial impact of these ongoing health insurance rate increases on families and individuals is significant,” Jones said. “Unfortunately, neither federal nor state law provides the authority to reject excessive health insurance rates."
Consumer Watchdog, a Santa Monica-based advocacy group, conducted an actuarial analysis of the most recent increase in conjunction with the New Jersey-based AIS Risk Consultants.
It concluded that Blue Shield's projections of future medical and administrative costs were too high. According to the data, the insurer said medical costs would increase 11.1%, while overhead would require 23.6% of premiums. More than 80% of the administrative costs would be comprised of a $380 million payment that Blue Shield Life and Health Insurance Co. would make to the parent company Blue Shield of California.
“Blue Shield has made overblown projections of healthcare costs and padded its overhead to impose higher rates that cannot be justified, even as healthcare cost growth continues to hit record lows,” said Carmen Balber, Consumer Watchdog's executive director.
According to data recently released by the Centers for Medicare & Medicaid Services, healthcare spending rose at a less than 4% annual rate in 2013, and that the past several years have seen some of the lowest spending bumps since the federal government began record-keeping in the early 1960s. Jones told California HealthLine earlier this week that a 4% hike by Blue Shield would be considered reasonable.
Enrollment in the Blue Shield individual policies regulated by Jones' agency stood at nearly 250,000 in 2010, but Blue Shield has been making filings in recent years that moved those policies' regulatory purview to the DMHC. That agency does not have an elected official at its helm and focuses its powers more on individual transgressions of insurers and providers than on pricing.
“More than 80% of membership is enrolled in Blue Shield of California (BSC) products regulated by the DMHC,” said Blue Shield spokesperson Steve Shivinsky. “So it makes sense to shift more of our business there, especially since the Affordable Care Act requirements provide for standardized benefits that eliminate any meaningful distinction between the products offered by BSC and Blue Shield Life, thus avoiding any significant public impact.”
Enrollment in Blue Shield's individual plans regulated by the Department of Insurance is expected to drop another third, to 54,000, by the end of 2014.
"This result is sadly consistent with Blue Shield's decision to take advantage of a special legal loophole that allows the company to move health insurance policies out from under Department of Insurance oversight—essentially allowing Blue Shield to pick its regulator. Consumer protection is compromised when the health insurer gets to pick its own regulator,” Jones said.
An initiative planned for the November ballot would give Jones and other state insurance regulators authority to reject premium increases they deem excessive if it is approved by voters.
