Fed, Calif Officials Vow to Fight Blue Shield Hike

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LOS ANGELES (AP) — U.S. Health and Human Services Secretary Kathleen Sebelius and California Insurance Commissioner Dave Jones are vowing to push back against massive health insurance rate hikes proposed by Blue Shield of California.

Blue Shield has implemented two rate hikes since Oct. 1 and plans another for March 1. Some policyholders would pay 59 percent more in premiums cumulatively over the three increases.

Jones, who has been an insurance regulator for only 72 hours, said in a press conference Thursday that he's asked the insurer for a 60-day delay in implementing the March hike so he can fully review the recent rate increases. But he noted his powers are limited.

Blue Shield did not immediately provide a response Thursday.

"Many Californians are understandably angry and upset over these rate hikes," said Jones. "Unfortunately, under California law it's simply the case that the insurance commissioner does not have the ability to simply reject excessive rate increases."

Jones announced Tuesday he is calling for increased enforcement powers by emergency regulation.

California has a "rate and file" law in which a rate hike proposal goes into effect 30 days after it is filed with the commissioner's office.

The only way a rate hike can be rejected by the commissioner is if it fails to meet the legal "medical loss ratio" requirement, or the required percentage of premiums that must be dedicated to medical care. Until this year, state regulation required insurers to spend 70 percent of premiums on health care, but federal reform now requires them to spend 80 percent on non-administrative costs.

In a statement, Sebelius says she's ready to assist California, and that rate increases "without public scrutiny" would be the wave of the future if federal health care reform were repealed.

"The people of California have a right to be concerned when they see this kind of rate increase month after month," said Sebelius. "We stand ready to assist (Jones) and the people of California in any way that we can."

Blue Shield's rate hike announcement comes as a freshman class of Republican congressmen arrives in Washington, vowing to make good on campaign promises to repeal federal health care reform.

Rate hikes have been central to the health care reform debate since President Barack Obama's final push to pass the bill, when he held up a massive proposed rate increase from Anthem Blue Cross as an example of a broken health care system.

The hike from California's largest insurer would have cost individual policyholders 25 percent more in premiums on average, with some customers facing 39 percent hikes. Following scrutiny from state-hired actuaries, Anthem's rate filing was found to have profitable errors, and the hike was reduced to 14 percent on average.

Dave Heller, executive director for Santa Monica-based consumer advocacy group Consumer Watchdog, said the rate hikes are a "shot across the bow" against Democratic leaders, and a signal to new Republican congressmen that the industry is willing to aid their fight to overturn reform.

"This is emblematic of one of the problems we see in the health insurance industry, where they do what's called death by a thousand cuts for consumers, with an accumulation of rate increases until holding a policy is no longer affordable," said Heller.

Heller warned that insurers have a profit motive to dramatically raise premiums now: If their income base expands enough, they won't take such a steep hit to profits under the new medical loss ratios.

Only about 5 percent of non-elderly Americans have individual insurance policies, a realm that would be regulated for price fairness and quality by state-operated, online marketplaces called health care exchanges, which are to be up and running by 2014.

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