Blue Shield Insurance has agreed to postpone implementing the huge rate increase it was planning on forcing upon it’s customers in California, at least for a little while longer. This will give the California Insurance Commissioner time to review the proposed rate increase. Unfortunately, the Insurance Commissioner of California doesn’t actually have the authority to stop Blue Shield from increasing it’s rates.
Blue Shield has said that the 59% rate increase was necessary because their costs are rising quickly. They have said that many providers of health care have increased their costs, which, one would assume could mean that Blue Shield was paying more on claims that came through those providers.
Blue Shield also has pointed to the bad economy as the reason why it needs to increase it’s rates so much. In other words, this insurance company is implying that the people who are healthy enough to get by without having health insurance have elected to do so. These potential customers either dropped their health insurance policies, or never got one in the first place, due to strained finances. As a result, this would, theoretically, leave Blue Shield with a higher percentage of customers who require a lot of expensive health care.
The interesting thing though, is that none of the other insurance companies in California, who would be competing in the exact same market as Blue Shield, felt the need to increase their rates by as much as 59%. Aetna Inc., Anthem Blue Cross, and PacifiCare, three of the competitors to Blue Shield, agreed last week to hold off on their own (more modest) rate increases for 60 days. However, Blue Shield was, until this week, preferring to just go ahead with it’s planned rate increases.
The 60 day waiting period is to give the Insurance Commissioner of California, Dave Jones, time to take a close look at the paperwork that explains why these companies want to increase their rates. He needs time to make sure that the information provided by these companies is complete, correct, and in compliance with the laws.
Blue Shield has now agreed to submit to the same review that it’s competitors have already agreed to. The Chief Executive of the company, Bruce Bodaken, said that they are taking this action to “remove any doubt” that the rates they submitted are necessary in order for them to pay the medical expenses of individual customers. He has also said that even with these rate increases in place, Blue Shield doesn’t expect that the premiums will cover the cost of medical care for all of it’s members.
Unfortunately, even if the California Insurance Commissioner comes to the conclusion that the rates that Blue Shield wants to impose are too high, there isn’t anything he can legally do to stop Blue Shield from going ahead with the increase in rates that it has planned. In California, the Insurance Commissioner does not have the authority to reject excessive rate increases. He can, however, state whether or not he feels the proposed rate increase is “unreasonable” and can post information on his website.
Image by Keith Ramsey on Flickr