Insurance Chief Jones Urges Blue Shield to Delay Big Rate Hike

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Only days into the job, state Insurance Commissioner Dave Jones faced off with the health insurance industry Thursday, calling on Blue Shield of California to delay plans to raise premiums by as much as 59 percent on nearly 200,000 Californians who buy health coverage on their own.

Jones, a Sacramento Democrat who was sworn in Monday, also renewed his push to give his agency the authority to reject "excessive rate increases."

The latest increase created an immediate uproar, not only among consumers, but among Democrats in Washington and consumer advocates trying to defend the nascent federal health care law against repeal by the new Republican majority in the U.S. House of Representatives.

If Blue Shield moves forward with the rate hike, it would be the third increase for the company's customers since last fall, including about 7,400 Blue Shield customers in the Sacramento area.

The most recent increase took effect less than a week ago, on New Year's Day, when the insurer hiked rates on individual policyholders by a relatively minuscule 1 percent, on average.

Under its latest planned rate increase, slated to take effect March 1, Blue Shield's customers would see an average increase of 30 percent on their premiums.

In a letter sent to Blue Shield's chief executive officer on Thursday, Jones asked the insurer to delay the increase by at least 60 days, to give the state Department of Insurance time to review the rate filing.

"As you undoubtedly know, I took office three days ago on January 3, 2011. I am very concerned about the impact of the premium increases that Blue Shield is proposing, increases that I have not had the opportunity to review," Jones wrote.

As an assemblyman, Jones long pushed hard, but failed, to win the state watchdog the same authority to reject rates filed by health insurers as it has to turn down car and property insurance rates since the passage of Proposition 103 in 1988.

Last month, Assemblyman Mike Feuer, D-West Hollywood, introduced legislation similar to what Jones has sought.

On New Year's Day, a new state law, SB 1163, went into effect requiring insurers to inform consumers and the Department of Insurance about rate hikes – and their justification – at least 60 days before they take effect. The information is supposed to be posted on the Internet.

The latest Blue Shield increases were filed Dec. 20, however, and the insurer was not required to comply with the new law, company spokesman Johnny Wong said in an e-mail.

Blue Shield was not the only company to raise premiums.

Anthem Blue Cross, the state's largest for-profit insurer, recently announced plans to raise rates for individual customers by 9.8 percent on average – on top of the 14 percent hike it put into effect in October.

The increase pales in comparison to the 39 percent rate hike Anthem proposed early last year, which provoked condemnation from elected officials in Sacramento and Washington – and helped rally consumer health advocates to push for passage of the federal health care law.

The company later withdrew the rate filing after actuaries found it riddled with math errors and bad assumptions.

Health Net on Jan. 1 also raised rates, by an average of 4 percent, on 37,000 customers with preferred provider coverage in the individual market, said spokesman Brad Kieffer. About 3,000 health maintenance customers saw rates go up an average of 1 percent.

Another rate increase could arrive in the fall, he said, after the company evaluates the cost drivers he says put pressure on premiums.

Insurers have said that their rising premiums reflect spiraling costs for medical care charged by hospitals, doctors and other medical providers.

"The reason premiums keep increasing is because medical costs are increasing two to three times faster than the rate of inflation," said Nicole Kasabian Evans, the spokeswoman for California's Health Plans.

"While health care reform does a lot to expand access to health care, it hasn't gone far enough to contain costs to help make it more affordable," she said.

Under the federal health care law, U.S. officials can review any rate increases above 10 percent. But the government has no authority to prohibit the increases as long as insurers spend at least 80 cents of every premium dollar on direct medical care.

Blue Shield said its rate increase was not the result of provisions contained in the federal health care law.

"These rates reflect trends that were building long before health reform," the company said in a statement e-mailed to reporters.

"Our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are dropping coverage during a bad economy. Health reform will help slow down this trend by expanding coverage, which will keep healthier people in the system."

Despite the rate increase, the company said it expects to "lose tens of millions of dollars on its individual health care business in both 2010 and 2011."

Even so, consumer advocates and congressional Democrats were quick to condemn Blue Shield's rate hikes.

"It's a health insurance company challenging the new commissioner, and frankly the president, in a fight over health insurance rates," said Doug Heller, executive director of Consumer Watchdog.

That sentiment was shared by key congressional Democrats, including Rep. Doris Matsui of Sacramento. "Quite frankly, this is outrageous," she said.

Contact The Bee's Bobby Caina Calvan, (916) 321-1067 or [email protected]

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