Jones Disappointed; Blue Shield Offers Private Review of Filing

“Blue Shield’s rate hike of up to 59% hits its approximately 200,000 policyholders very hard. It comes at a time when many Californians continue to struggle. These health insurance rate hikes are not sustainable,” said Insurance Commissioner Dave Jones in a statement issued today.  

“I am disappointed that Blue Shield has not agreed to my reasonable request that they delay the implementation of their March 1, 2011 rate increase. I made that request in light of the fact that I had been sworn in only for 72 hours and wanted to make sure that I have the time needed to review their rate filing for compliance with a new state law (SB 1163) that went into effect January 1, 2011. SB 1163 requires the Insurance Commissioner to review the reasonableness of health insurance rate increases. It does not give the Insurance Commissioner the authority to reject unreasonable rate increases. Despite Blue Shield’s unwillingness to delay their rate increase, the Department of Insurance will conduct a full and complete review of their rate filing," said Jones.

However, Blue Shield of California announced today that it will voluntarily subject its rates to an independent actuarial review and make refunds to policyholders if the actuary finds that the rates are unsound.  David Axene, the respected actuary who discovered errors in other California rate filings last year, will conduct the independent review of the not-for-profit health plan's rates.

Approximately 194,000 Blue Shield of California Life and Health Insurance Company members recently received notices of rate increases that averaged 15% annually.  Due to a variety of factors, some members received increases much higher than the average.  

"We regret that our members have received significant rate increases in recent months and want to be absolutely certain that the rates reflect our actual cost of providing medical care," said Blue Shield Chairman and CEO Bruce Bodaken.  "To establish trust and confidence in our rate-setting process, we have taken the unprecedented step of agreeing to be bound by the conclusions of an independent third party.  If this independent review finds that the rates are not sound, we will hold our members harmless by refunding the difference with interest."

Blue Shield said Axene will be free to confer with the Department of Insurance on his review that should  be completed in 30-45 days. According to Blue Shield, Axene evaluate the rate filing to determine if its calculations are accurate and its assumptions are sound as well as conforming to recently proposed federal rate review regulations. The report will be made available to the public on completion.   

Blue Shield said that despite recent increases, they expects to lose $10-20 million on its individual health plan business in 2010 and another $20-30 million in 2011. Blue Shield's total costs for hospitals, physicians and prescription drugs have risen by an average of 15% annually for each of the past three years. 

Jones said the Blue Shield rate increase underscores the need for the Legislature to give him the authority to reject excessive premium increases.  

“I have been fighting to get that authority,” said Jones. “As a State Assembly member I authored bills to give the Insurance Commissioner the authority to reject excessive premium increases. I look forward to working with Assembly member Mike Feuer who has re-introduced this legislation.”