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CA Department of Insurance

Insurance Commissioner Jones Issues Statement On Blue Shield's Withdrawal Of Individual Market Rate Increase

News: 2011 Press Release

For Release: March 16, 2011
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Insurance Commissioner Jones Issues Statement On Blue Shield's Withdrawal Of Individual Market Rate Increase
Insurer commits to not increasing rates to individual or family plans for rest of the year

Insurance Commissioner Dave Jones today issued the following statement after Blue Shield of California announced it would withdraw its most recent rate filing with the California Department of Insurance:

"I am pleased that Blue Shield announced this morning that it has decided not to move forward with the third of its three rate increases in less than a year. For some Blue Shield policyholders, the total of these three rate increases was as much as 87%. (The third rate increase itself was an average of 6.5 %.)

"Today's decision by Blue Shield confirms the need to give the Insurance Commissioner the authority to reject excessive rate hikes. Many Californians will be surprised to learn that the Insurance Commissioner does not have the authority to reject excessive health insurance rate increases. In California, unlike in 20 other states, health insurers get to decide whether to increase health insurance rates without approval from the insurance regulator, just as Blue Shield raised rates two times and proposed to raise rates yet a third time, until today's announcement. In order to protect consumers from excessive rate hikes, I am sponsoring Assembly Bill 52, authored by Assemblymember Mike Feuer, to give the Insurance Commissioner the authority to reject excessive rate hikes.

"During my first week as Insurance Commissioner, I learned that Blue Shield had just notified their policyholders of a March 1st premium increase. For many policyholders this would be their third health insurance premium increase since October 2010. I immediately asked Blue Shield to delay their March 1st premium increase for 60-days, so that I would have the time necessary to thoroughly review their rate filing. Blue Shield initially refused my request for a 60-day delay.

"I also asked Anthem Blue Cross, Aetna and PacifiCare for 60-day delays in implementing their pending rate increases and they all agreed to the delay. Blue Shield then agreed to a 60-day delay. Over time, they have provided my Department with much of the information we requested about their proposed rate increases. It was just last week that the Department received additional requested information necessary to do a thorough review of these rate increases. The information provided by Blue Shield and other insurers about their rate filings is posted on the Department's website. "Since news about Blue Shield's proposed rate increase broke a couple of months ago, over one thousand people contacted my office to express how concerned they were about the impact the proposed rate increase would have. The Department of Insurance has been reviewing the rate filing and seeking additional information as we identified concerns.

"In their statement, Blue Shield noted its support for the federal healthcare reform legislation. I appreciate Blue Shield's support for federal healthcare reform and the new Health Benefits Exchange, which California is working to establish by 2014 under the healthcare reform legislation. The federal healthcare reform legislation calls on the Insurance Commissioner to recommend to the Health Benefits Exchange which insurers should be permitted to sell health insurance in this new market based on the reasonableness of their rate increases. Blue Shield's decision to refrain from a third rate increase is certainly consistent with their desire to participate in the Exchange.

"But one of the missing pieces of the federal healthcare reform is the authority to reject excessive rate hikes. Today's news is a welcome development and certainly a relief for several hundred thousand of Blue Shield policyholders in California, but it reminds us all that insurance companies hold all the cards when it comes to setting rates. Blue Shield policyholders still had to pay the first two rate increases. Those with health insurance are at the mercy of insurance company decisions to raise rates multiple times each year. That's why we need to pass Assembly Bill 52."

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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