Insurance Commissioner Dave Jones Disapproves Blue Shield's Proposal to Close Health Insurance Products for Individuals
News: 2012 Press Release
Insurance Commissioner Dave Jones has disapproved Blue Shield Life & Health Company's notice of intention to close most of its individual market block of business regulated by the Department of Insurance on July 2, 2012. The Department of Insurance originally disapproved the block closure on March 3, 2012 and requested additional information from Blue Shield. Blue Shield provided additional information to the Department in March and again in June.
The Department reviewed the submitted information and sustained the disapproval of the block closure because the pooling plan submitted to the Department does not comply with the requirements of Insurance Code section 10176.10. Specifically, the size of the remaining open block is inadequate for pooling based on consideration of the accumulative recent and expected future experience of the closed forms and the open block with which the closed forms are to be combined. In addition, inadequate provision has been made for the more than 20,000 consumers in the Vital Shield 2900 Plan, as they have no transfer right without underwriting.
"When consumers purchase health insurance, they should not have to worry that their health insurer will make decisions to open new products and close others in ways that put the policyholder at risk of being pooled with unhealthy lives whose claims costs are likely to cause premiums to increase," commented Insurance Commissioner Dave Jones. "While insurers are allowed under certain circumstances to close products, when they do so they have to pool the policyholders in those blocks with other open blocks so that closed blocks don't end up in a "death spiral" with mounting costs for policyholders in the closed blocks because new policyholders are not coming into the block. Blue Shield is proposing to pool the closed blocks with a single, small open block-in effect pooling the closed blocks into a tea cup-such that policyholders in the closed blocks get none of the safeguard that was intended by requiring pooling with open blocks."
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2013 the California Department of Insurance received more than 170,000 calls from consumers and helped recover over $63 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.