New rates at Blue Cross are a meager victory

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At the shoe store, 40% off qualifies as at least pretty good. So why does regulators’ approval of new, lower rates by Blue Cross of California not feel like victory?

There are lots of reasons, but first is that the revised Blue Cross rate hikes are still in double digits, averaging 14% and as high as 20%, while average wages are still falling. And Blue Cross could announce another rate hike whenever it pleases, just as many insurers continue to do.

The only permanent fix is to require regulators to review rates before they go into effect, and to bar increases that are excessive. The reason it hasn’t happened already is the insurance industry’s lobbying might in the state Legislature.

A bill to require such prior review of health insurance rates is before the state Senate, (AB 2587, Asm. Dave Jones) with only a few more days before lawmakers end their session. Gov. Arnold Schwarzenegger opposes rate regulation, but if the bill hit his desk, he’d have a very hard time justifying a veto after the Blue Cross fiasco.

Schwarzenegger claims to offer an alternative proposal, but once you read the details, it’s an insurance executive’s dream: the proposal calls for all kinds of transparency measures but does not give regulators one iota of power to stop any kind of premium increase, no matter how outrageous.

So a Blue Cross rate cut in response to a burst of public outrage doesn’t offer much cheer unless the Legislature devleops enough spine to make that kind of rate examination permanent, and give regulators the teeth they need. Otherwise, Blue Cross will just return to bad old business as usual, and hire a dozen more VPs for PR to spin the next round of double-digit increase.

Consumer Watchdog
Consumer Watchdog
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