Blue Shield calls pending rate hikes reasonable
Blue Shield of California, assailed by consumers and state regulators for seeking to hike insurance rates as much as 59% in recent months, declared after a review that its proposed rates are reasonable.
A consultant hired by the nonprofit insurer to examine its filing for March 1 determined that the pending rate hikes — averaging 6.5% and reaching as high as 18% — are not excessive in light of fast-rising healthcare costs.
The rate increases for nearly 200,000 individual policyholders are on hold for 60 days while state regulators examine them.
On Monday, state Insurance Commissioner Dave Jones voiced skepticism about Blue Shield’s new report. He said the San Francisco insurer had yet to fully answer questions he had raised about the filing. Nor does the consultant’s study resolve the matter, Jones said.
“Our preliminary review of the report on Blue Shield’s most recent rate filing indicates the insurer has failed to provide all the information we requested and this has led to serious concerns about their filing,” Jones said in a statement. “We will continue to review it thoroughly.”
Blue Shield said that it was cooperating with actuaries from the Department of Insurance but that the consultant’s report, to be released Tuesday, demonstrated that its rate increases are fair.
“We’re gratified that the independent review concluded that our filing was mistake free, that our assumptions were accurate and that our rates were reasonable and met the requirements of state and federal law,” Blue Shield spokesman Tom Epstein said.
Blue Shield raised rates Oct. 1 for individual policyholders and followed that with a second increase Jan. 1. A third hike was scheduled for March 1 until it was postponed at Jones’ request. In all, the three increases would have driven up the cost of some Blue Shield policies as much as 59%.
Blue Shield defended the need for repeated increases, calling them necessary to pay for the rising cost of medical care and new insurance requirements under state and federal law.
After complaints from policyholders prompted Jones to investigate, Blue Shield hired Axene Health Partners to examine its paperwork. The Riverside County consultant knew Blue Shield well: It had reviewed its filings last year at the request of the insurance department and found no mistakes.
The consultant also found no errors this time. Company President David Axene said in his report that, because Blue Shield’s underlying healthcare costs are rising significantly, “it should not be surprising to see premium rates increasing at or around the 18.5% level.”
Axene said that Blue Shield’s proposed rates “are reasonable, not excessive, and meet the requirements of the California Department of Insurance, in addition to requirements of” the new federal healthcare law.
Axene said his calculations showed that in 2011 and 2012 Blue Shield will meet a requirement in the federal law that insurers spend at least 80 cents of every premium dollar on medical care for members.
“It is our opinion,” Axene wrote, “that the requested rates should be accepted by the department.”
Must-read stories from the L.A. Times
Get the day's top news with our Today's Headlines newsletter, sent every weekday morning.
You may occasionally receive promotional content from the Los Angeles Times.