Department of Insurance finds Blue Shield 9.8 percent increase on grandfathered policies excessive and unreasonable
News: 2014 Press Release
SACRAMENTO, Calif. - Insurance Commissioner Dave Jones announced today that the 9.8 percent health insurance premium increase Blue Shield is imposing on the 81,000 members in grandfathered plans regulated by the Department of Insurance and sold to individuals and families is excessive and unreasonable.
This 9.8 percent January 1, 2014 rate increase for Blue Shield's grandfathered policyholders is an average rate increase of 22.6 percent over 12 months. Over the last 24 months Blue Shield has raised rates on these grandfathered policyholders an average of 32.3 percent.
"The cumulative financial impact of these ongoing health insurance rate increases on families and individuals is significant," said Insurance Commissioner Dave Jones. "Unfortunately, neither federal nor state law provides the authority to reject excessive health insurance rates."
"Blue Shield's 32.3 percent average rate increase over the last two years on these grandfathered policyholders has resulted in many people actually giving up these policies, which are regulated by the Department of Insurance," said Commissioner Jones. "This result is sadly consistent with Blue Shield's decision to take advantage of a special legal loophole that allows the company to move health insurance policies out from under Department of Insurance oversight-essentially allowing Blue Shield to pick its regulator. Consumer protection is compromised when the health insurer gets to pick its own regulator."
The commissioner's conclusion that the Blue Shield rate increase is excessive and unreasonable is based on data provided by the company and a comprehensive analysis conducted by the department. The department's health actuaries reviewed all aspects of the rate filings, including past claims history, utilization trends, medical and administrative costs, return on equity or profit, and many other elements of the rate, and determined it was not reasonable.
The commissioner's authority is limited to reviewing rate filings, with no authority to stop excessive health insurance rates from being imposed on policyholders. While state law requires the commissioner to determine if rates are excessive or unreasonable, neither state nor federal law makes the commissioner's determination binding on the health insurers. Current law allows health insurers in California to charge any rate they want, even when overcharging policyholders year after year.
Last year the Department of Insurance found the 2014 policy forms filed by Blue Shield also failed to comply with the Affordable Care Act, found the medical provider network filing non-compliant and new 2014 rates unreasonable. Blue Shield advised the Department that it was taking advantage of a special legal loophole that allows it to pick its regulator and withdrawing its filings from the Department of Insurance and moving all health insurance under a different regulator.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $289 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 $394 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.