Blue Shield’s blues
In another sign of dysfunction in the U.S. healthcare system, Blue Shield of California has levied three rate increases in rapid succession that could raise some premiums as much as 59%. New state Insurance Commissioner Dave Jones has said he plans to scrutinize the increases, and that’s a good thing, given that Anthem Blue Cross sought a huge increase in premiums last year based on faulty math. But Blue Shield’s request also highlights why the country should stay the course on healthcare reform.
The three increases announced by the insurer, the last of which would go into effect March 1, would collectively raise rates 30% on average for people who buy coverage individually. That’s a much higher jump than in the premiums for group insurance policies and a significantly larger increase than the overall rate of healthcare inflation.
Critics of last year’s healthcare reform bill argue that Blue Shield’s move is a direct consequence of Congress’ meddling. That charge is easy to dismiss. Blue Shield has made it clear that only a small portion of its increase in costs is attributable to the added benefits required by the law.
Rather, the company said, the main factors are increased fees for doctors and other care providers and the growing demand for treatment by the company’s customers. What that reflects, though, is that Blue Shield is attracting fewer healthy customers for its individual plans, leaving fewer people to shoulder the rising burdens.
The healthcare law attempts to break that cycle in two ways: by gathering individual policyholders into one big group through new statewide exchanges that can bargain for lower rates, and by requiring everyone to obtain coverage. Granted, the controversial mandate may not be as effective as it should be. Yet it will deter most people from waiting to buy insurance until they need expensive treatment.
There are still at least two pieces missing from the reform effort. A recently enacted state law instructs the insurance commissioner to determine whether premiums for individual health coverage are reasonable, but doesn’t give him the power to block or modify rates that don’t meet that standard. The only limit is the federal requirement that insurers spend at least 80% of the premium dollars they collect on medical costs. That’s no substitute for the commissioner being able to block unreasonable rates, and the Legislature should give him that authority.
A second issue is that although federal law encourages insurers, hospitals and doctors to coordinate care and control costs for Medicare patients and other groups, there is no such incentive for slowing the cost increase for individual policyholders. The new state insurance exchange could address that situation too, which is all the more reason not to abandon the reform before some of its most important features go into effect.