Blue Shield Defends Rate Increase Criticized by Insurance Commissioner

The process reminds California Insurance Commissioner Dave Jones of the Bill Murray movie, "Groundhog Day," in which history keeps repeating itself, day after day.

In recent years, Jones has reviewed a series of rate increases for health plans from multiple providers, and repeatedly found them "unreasonable."

Yet to his dismay, the premium increases go into effect.

Déjà vu all over again, Yogi Berra would have called it. Again.

The most recent case is an 11.7 percent annual premium increase on average for 260,000 members of a Blue Shield individual plan, as Insurance Department actuaries computed it. In two years, some individual policy holders will experience an increase of 20.5 percent.

"These are the kinds of increases that are unsustainable," Jones said.

"You're stuck and they know it," said Gracee Arthur, a Blue Shield policy holder.

The real estate agent expects her $691-per-month premium to rise to more than $750.

"I'm grateful I can afford it, but I resent it," Arthur said.

Others find themselves considering other options, even going uninsured.

At age 64, Bill Richardson, of San Diego, who runs his own pool maintenance business, will be eligible for Medicare in eight months. Ultimately, Richardson decided the downside risk of being without insurance is too great, and he will find the money to pay the higher premium till he can rely on Medicare, he said.

The premium increases are necessitated by rising costs of medical care, according to Blue Shield and other health plan providers that have passed increases to their members.

"Blue Shield has lost tens of millions of dollars in the individual market in recent years and we expect similar losses in 2013," according to a Blue Shield statement posted on the company’s website.

But Commissioner Jones contends there are places to cut, including "excessive administrative costs" projected at 20.2 percent, and "unfair cost shifting" from one segment of policy holders to members of the group plan.

The Commissioner's review also found that Blue Shield's projection claim costs are too high.

And yet the commissioner is powerless to compel Blue Shield, or any other health plan, to make those revisions.

"There's nothing I can do to stop the rate increase," Jones said.

Unlike 34 other states, and unlike other types of insurance within California -- auto, for example -- California's Insurance Commissioner lacks veto power over proposed health plan rate increases.
Repeated efforts in the state legislature to change this have fallen short in the face of health plan industry opposition.

"Until California has the power to say 'no,' we're going to be stuck with double-digit rate increases," said consumer advocate Carmen Balber, executive director of Consumer Watchdog.

Twenty-five years ago, the organization spearheaded the Proposition 103 initiative that imposed state controls on auto insurance.

Now, Consumer Watchdog wants to expand the commissioner's power over health plans.

More than 800,000 signatures were gathered for an initiative that will go before voters statewide in 2014.

Another approach is being taken by Sen. Dianne Feinstein, D-CA, introducing a bill that would empower the federal Department of Health and Human Services to veto "unreasonable" health plan rate increases in those states that have not asserted such authority.

On occasion, California's insurance commissioner has been able to persuade a provider to reduce a planned premium hike. In February, Anthem Blue Cross agreed to cut a planned 17.93 percent increase to 13.87 percent. This affected 630,000 individual and family policy holders.

Not everyone is convinced the upward spiral of medical cost increases is inevitable. From 2009-11, the rate of medical cost increases slowed, Balber said.

The healthcare landscape will change dramatically at the end of this year with the implementation of the most significant provisions of the federal Affordable Care Act, experts agree.

The creation of state insurance exchanges, and a prohibition against denying coverage on the basis of a pre-existing condition, will enable consumers to move more freely between health plan providers, according to Patrick Johnston, president of the California Association of Health Plans.

What's more, government subsidies will become available for individuals and families priced out of traditional low-income healthcare programs such as Medi-Cal.

"People with moderate incomes -- even families of four earning up to $90,000 -- will be eligible for subsidies on a sliding scale," Johnston said.

The Health Plan Association maintains this will be a more effective way to increase health plan affordability than empowering government regulators to set rates.

Whatever it takes, Commissioner Jones hopes health plan premiums will move beyond the Groundhog Day repetition of unchecked increases, as do individuals and families who now find themselves at the edge of healthcare affordability.