Blue Shield Backs Off On Rate Hike

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•  Retreat follows criticism from consumer groups, state

•  Says individual and family plan rates won’t change this year

LOS ANGELES, CA — Blue Shield of California says it will freeze rates until next year for any individual or family plan member, canceling a hike that would have raised some policyholders' premiums as much as 86.5 percent. The health plan has about 340,000 individual and family plan members in California.

“By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times,” says Blue Shield of California Chairman and CEO Bruce Bodaken. “It's a financial risk for us, but a risk that's worth taking."

But consumer groups fail to see any altruism and suspect it’s a strategic move to defuse tougher regulations.

Consumer Watchdog of Santa Monica says Blue Shield acted in hopes of avoiding Assembly Bill 52, which would give the insurance commissioner power to reject excessive health insurance premium hikes. Currently the commissioner only has that power over auto, home, and other property-casualty insurance rates.

“Blue Shield is trying to vent the steam of public pressure that has built up in the wake of massive rate hikes and hoping to quiet the call for real oversight and regulation," says Doug Heller, executive director of Consumer Watchdog.

Blue Shield claims it lost $27 million on individual health insurance coverage in 2010. It says that even if it had gotten its requested rate hike, it still would have lost money this year on individual and family plan insurance.

“The fact that Blue Shield adamantly insisted these hikes were necessary and suddenly decided to withdraw them, just proves that insurance companies will try to get as much money as they can from policyholders as long as no one has the power to stop them,” says Mr. Heller.

The proposed reform legislation, AB 52, would require insurance companies to get permission before implementing any hike and would allow the insurance commissioner to deny or modify rate changes determined to be excessive.

Under rates that are already in effect, some Blue Shield members will see their premiums change in 2011 if they move to a new region, add or subtract family members from their policy, or enter a new age range, the company says. Blue Shield changes rates based on age every five years, at the time of the member's birthday.

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