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Blue Shield of California’s rate hike not justified

May 9, 2011

Consumers Union Analysis Finds Blue Shield Rate Hike Not Justified

CU Calls Upon Department of Managed Healthcare to Fully Review Underlying Data

SAN FRANCISCO, CA – Blue Shield’s latest proposed rate hike on individual policyholders in California is unjustified according to an analysis by Consumers Union, the non-profit publisher of Consumer Reports. Consumers Union outlined its concerns about Blue shield’s rate increase in a letter to the California Department of Managed Healthcare, which is evaluating the rate filing.
In April, Blue Shield filed a report from Axene Health Partners to support its plan to raise rates an average of 17.6%, effective January 1, 2011, for 10 DMHC plans. According to the Axene report, this increase comes on top of Blue Shield’s last increase averaging 25%. The cumulative impact of these increases during the past 18 months is an average of 37.5%, according to DMHC. All insurers and health plans in California are now required to justify their rates as “actuarially sound.”
“Blue Shield’s rate filing fails to make the case for its huge rate hike request,” said Sondra Roberto, staff attorney for Consumers Union. “Blue Shield is a financially strong, non-profit with a mission to ensure all Californians have access to high-quality healthcare at an affordable price. Because of its nonprofit mission, Blue Shield has an obligation to fully justify these continuing double-digit rate hikes and to provide coverage at affordable rates, especially for customers who purchase coverage on their own.”
In its letter to the DMHC, Consumers Union noted that Blue shield had provided only sparse documentation to justify the rate increase and relied on numerous assumptions that are not supported by the data. Blue Shield has aggressively projected claims and expenses for the rating period, and has built in unnecessary profit margins. Moreover, the company’s financial strength, when weighed against the hardship of this increase on consumers, calls into question whether the increase is unreasonable.
California has a new rate transparency law in effect as of Jan. 1, 2011, that requires more data to be submitted with rate increases and requires rates to be “actuarially sound.” But California still lacks the authority to reject excessive rate increases outright. That could change if state lawmakers pass AB 52, which would give our health insurance regulators “prior approval” authority so they could turn down rate hikes when they are found to be excessive. AB 52 was approved by the Assembly Health Committee in April and is now pending before the Appropriations Committee.
Michael McCauley – 415-431-6747, ext 126; mccami@consumer.org