Consumer Watchdog: Blue Shield Imposes 19.9% Unreasonable Rate Hike in California

Sen. Feinstein, Rep. Schakowsky Introduce Legislation Giving HHS Power to Deny Unreasonable Health Insurance Rate Hikes When States Can't

WASHINGTON and SANTA MONICA, Calif., March 7, 2013 /PRNewswire-USNewswire/ -- Blue Shield of California will impose an unreasonable rate hike as high as 19.9% on 268,000 Californians because the state's insurance commissioner does not have the power to reject unjustified health insurance premiums. Senator Dianne Feinstein and Representative Jan Schakowsky introduced legislation Wednesday to close a loophole in federal health reform and give the Secretary of Health and Human Services the power to reject or modify unreasonable health insurance rate increases in cases, like California, where states lack that authority.

Consumer Watchdog applauded the bill as a critical reform to address the increasing unaffordability of private health insurance as the 2014 deadline nears for every American to prove they have coverage under federal health reform.

"This 20% unreasonable rate hike by Blue Shield of California exposes the major affordability loophole in federal health reform. Every American will be required to purchase health insurance by the end of the year, but unjustified double-digit increases continue unchecked because many states don't have the power to tell insurance companies no. Senator Feinstein and Representative Schakowsky's proposal would allow HHS to block unreasonable rate increases in states where regulators don't have, or won't use, that power," said Carmen Balber, executive director with Consumer Watchdog.

Consumers' health insurance premiums are rising in the double digits even as medical spending slows. The Centers for Medicare and Medicaid Services reported in January that health spending increased just 3.9% in 2011, a record low pace of growth for the third year in a row. The Bureau of Labor Statistics Consumer Price Index reported medical care services increased just 3.7% in 2012.

An actuarial analysis released by the California Department of Insurance today found that Blue Shield's rate hike for 268,000 Californians was unreasonable. The findings include: Projected administrative costs of over 20% are excessive, the highest among major carriers; projected medical trend of 10.6% is excessive; and, the company is improperly shifting costs from group plans to individual consumers.

A pattern of unreasonable health insurance rate hikes has emerged in California. Anthem Blue Cross imposed an unreasonable rate hike on more than 250,000 small business customers in December. According to the analysis that found the 10% hike was unreasonable, Anthem's "company-wide rates of return on equity have been and remain excessive." Anthem Blue Cross imposed another unreasonable rate hike of 16% on 120,000 Californians with individual policies in 2011. The legislation proposed by Senator Feinstein and Representative Schakowsky would have allowed HHS to step in and deny these rate increases because California insurance regulators did not have the power to act.

Senator Feinstein and California Insurance Commissioner Dave Jones also support a ballot initiative on the 2014 general election ballot that would change California law to require health insurance companies to publicly justify and get approval for rate increases before they take effect. The initiative measure is based on a successful California law called Proposition 103 that regulates auto, home and other business and property insurance and has saved California drivers $62 billion since it took effect in 1988.

Find us online at www.ConsumerWatchdog.org 

SOURCE Consumer Watchdog