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CA Department of Insurance

Department of Insurance Determines Blue Shield Rate Increase Is Unreasonable

News: 2013 Press Release

For Release: March 7, 2013
Media Calls Only: 916-492-3566
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Department of Insurance Determines Blue Shield Rate Increase Is Unreasonable
Rate increases as high as 19.9 percent for policyholders in the individual market

SACRAMENTO - Insurance Commissioner Dave Jones announced today that the 11.7 percent average rate increase imposed by Blue Shield of California Life and Health Insurance Company is unreasonable. The increase, effective March 1, 2013, impacts approximately 268,000 Blue Shield individual health insurance policyholders.

Department actuaries reviewing the rate increase found that the average 12-month increase for individual members in all plans is 11.7 percent, while the maximum 12-month increase reached 19.9 percent before changes associated with age, geography or family status occurs. Blue Shield individual policyholders are experiencing an average increase as high as 20.5 percent over a 24-month period.

Unlike other lines of insurance, the Commissioner does not have the authority to reject excessive health insurance premium increases.

"Once again California health insurance consumers are faced with another double-digit rate increase," said Commissioner Jones. "After a comprehensive review of Blue Shield's rate filing, my department's actuaries concluded that Blue Shield's latest rate increase is not reasonable. Blue Shield is imposing the rate increase despite our finding it to be unreasonable. Until the law is changed so that health insurers have to reduce rates that are found to be excessive or unreasonable by the Insurance Commissioner, Californians will continue to see ever rising rates, even with the implementation of the Affordable Care Act."

Commissioner Jones requested that Blue Shield reduce its filed rates for the benefit of its policyholders and to avoid the Department finding the rate unreasonable. The Commissioner's requested reduction of the rate increase would have saved Blue Shield health insurance policyholders as much as $16.5 million as their policies renew this year. Commissioner Jones' request that Blue Shield lower the proposed rate increase was rejected by the company.

Department actuaries determined that the rate increases submitted by Blue Shield in its latest individual rate filing are unreasonable based upon the following key findings:

  • Excessive administrative costs. Blue Shield's 20.2 percent projected administrative costs continues to be the highest among major carriers in the individual market;
  • Core medical trend. The department finds Blue Shield's projected core medical trend of 10.6 percent unreasonable;
  • Unfair cost shifting. Blue Shield added 2.3 percent 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 filings are posted on the California Department of Insurance website for the public to view.

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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