After initially balking, health insurer Blue Shield of California has agreed to a request by California's insurance commissioner to delay a March 1 rate increase for 60 days.
Commissioner Dave Jones had called on the San Francisco nonprofit last month to postpone the pending hike for 158,000 individual policyholders so his office could closely examine the paperwork.
At the time, the company said it intended to go ahead with its third increase since October that together would raise policyholders' rates as much as 59%. Blue Shield hired an outside actuary to review its filing and promised to issue refunds if mistakes were found.
On Tuesday, the insurer did an about-face, saying it would comply with Jones' request, even as it pushed ahead with its independent review of the March 1 increases, which would average 6.5% and be as high as 18%.
Blue Shield followed three of its competitors — Aetna Inc., Anthem Blue Cross and PacifiCare — in agreeing to requests from Jones to delay rate increases for 60 days.
"We are taking this action to remove any doubt that the rates we have submitted are necessary to pay the medical expenses of our individual members," Blue Shield Chief Executive Bruce Bodaken said in a statement.
Jones said he was pleased by Blue Shield's decision, noting that hundreds of policyholders had contacted his office to voice their anxiety about the rate hikes.
Jones pointed out that he can block increases only in cases in which an insurer does not spend enough of its premium income on medical care for policyholders. The federal government has set that threshold at 80% of income. Last month, Jones issued an emergency regulation giving him authority to enforce the federal rule.
"Before Blue Shield policyholders face additional rate hikes, we need time to review the rate filings to ensure compliance with the new law that requires that 80 cents of every premium dollar is spent on providing healthcare and to determine whether the proposed rate increases are unreasonable," Jones said.
One state legislator said he hoped the uproar over Blue Shield's rates would help him pass a bill — AB 52 — to give the insurance commissioner authority to reject increases. Similar bills have failed three times in four years.
"This episode underscores the critical need for the state to have robust authority to review and approve rate increases, and to reject increases that insurers can't justify," said Assemblyman Mike Feuer (D-Los Angeles). "Without a rate-approval process in place, Californians will continue to be subject to outrageous rate increases."
Blue Shield's decision to delay its rate hikes came as a small group of policyholders and nurses protested outside its San Francisco headquarters. The demonstrators said they wanted to call attention to the increases and to what they said was the insurer's penchant for denying claims.
"It's not just one insurance company that is the problem," said Charles Idelson, a spokesman for the California Nurses Assn., which organized the event. "It's an unsustainable system."
Blue Shield said that aside from the 158,000 individual policyholders who would have seen higher rates March 1, about 36,000 more would see the same hikes by September.
Blue Shield said the increases are necessary to keep up with escalating healthcare costs, greater use of medical services by its customers and new government mandates, among other factors. After figuring in the higher rates, the company still expects to lose $20 million to $30 million on its individual policies this year.
"Even with these increases," Bodaken said, "we don't expect the premiums to cover the cost of medical care for these members."