Blue Shield’s Self-Serving Rate Review Confirms Need for Regulation of Health Insurance Premiums

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Santa Monica, CA – Blue Shield has announced that the consulting firm it hired to review its most recent rate hike plan found no mistakes and concluded Blue Shield should be allowed to raise rates on California policyholders.  Though the Department of Insurance got Blue Shield to delay the increase, originally set to take effect today, so the department could conduct its own review, the insurance commissioner will not be able to block the hike even if he finds it to be excessive.  It is expected that Blue Shield policyholders’ premiums will increase beginning on May 1.

“Hiring a consultant to check your math and claiming it’s a legitimate, independent review is laughable,” said Consumer Watchdog Executive Director Doug Heller.  “Californians don’t really care what Blue Shield or its consultants say. We want to know what the Insurance Commissioner determines and we want him to have the power to enforce his findings.”

The rate hike that Blue Shield’s consultant claims is reasonable is the company’s third major hike in recent months, which add up to as much as a 59% increase for California policyholders.  Under current California law the Insurance Commissioner is allowed to review the hikes but does not have the power to reject increases if he determines they are excessive and unnecessary.  With medical costs rising only by single digits in recent years, Blue Shield’s cumulative 59% hike in less than a year appears indefensible, according to Consumer Watchdog, and Insurance Commissioner Dave Jones has expressed skepticism about the report Blue Shield released today.

Assemblyman Mike Feuer (D-Los Angeles) has introduced AB 52 to give the Insurance Commissioner the power to regulate health insurance rates and reject excessive increases.  The bill would enact rules similar to Proposition 103, which requires the Insurance Commissioner to regulate auto insurance rates.  Under those rules California motorists have saved more than $62 billion on their auto coverage over the past two decades, according to a 2008 report by the Consumer Federation of America.

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Consumer Watchdog is a nonprofit, nonpartisan organization with offices in California and Washington, D.C.

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