Commissioner Calls Blue Shield’s Rate Increase Unreasonable

Insurance Commissioner Dave Jones says that the 11.7% average rate increase imposed by Blue Shield of California is unreasonable. The increase, effective March 1, 2013, affects about 268,000 Blue Shield individual health insurance policyholders. Department actuaries found that the average 12-month increase for individual members in all plans is 11.7% while the maximum 12-month increase reached 19.9% before changes associated with age, geography or family status occur. Blue Shield individual policyholders are experiencing an average increase as high as 20.5% over a 24-month period, he said. State actuaries say that Blue Shield’s 20.2% projected administrative costs are the highest among major carriers in the individual market.  The core medical trend is 10.6%. Blue Shield added 2.3% to policyholders’ premiums to account for projected losses due to HIPAA/conversion plans. The Department determined this action to be unreasonable because projected losses from people who came out of the group market should not be shifted to and/or subsidized by the individual market.  Blue Shield’s rate filing was submitted to the department on December 31, 2012.

The company issued the following statement:
Blue Shield of California’s Individual and Family Plan rates are reasonable. Here’s why:
• Our rate increases are lower than recent rate increases approved for most of our major competitors.
• Our premiums in the individual market are competitive with, and in some cases lower than, those of our competitors.
• These rates reflect the increases needed to keep pace with the medical costs for our members in 2013. Unfortunately, the cost of hospital and physician services, prescription drugs, and diagnostic tests continues to rise.
• Our rates meet the federal Medical Loss Ratio standard requiring 80% of premiums to be spent on medical care for our members. An independent actuary certified our rates as reasonable and meeting the MLR standard.
• Blue Shield has lost tens of millions of dollars in the individual market in recent years and we expect similar losses in 2013.

That said, we share the concerns of regulators and consumers about rising health insurance premiums. As a not-for-profit company whose mission is to provide access to quality, affordable coverage for all Californians, we are taking many actions to address rising medical costs, including collaborations with providers that improve quality while saving money for our customers. In addition, we limit our profits to two percent of revenue, returning anything above two percent to our customers and the community. Our 2% pledge assures our members that when we raise rates, it is not done to increase our profits.

Last Updated 06/29/2022

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