New California Insurance Commissioner Dave Jones had asked Blue Shield… (Katie Falkenberg / For The…)
Defying California's new insurance commissioner, Blue Shield of California has refused to delay controversial health insurance rate hikes that sparked an uproar among customers seeing successive increases that could total as much as 59%.
Instead, the nonprofit insurer said it would submit its latest increase — effective March 1 and averaging 15% — for review by an outside expert. It pledged to issue refunds to customers if errors are found in its paperwork.
"To establish trust and confidence in our rate-setting process, we have taken the unprecedented step of agreeing to be bound by the conclusions of an independent third party," Blue Shield Chief Executive Bruce Bodaken said in a statement.
Insurance Commissioner Dave Jones assailed Blue Shield's move. He discounted its action as "unprecedented," noting that a new state law requires insurers to obtain independent actuarial reviews of their rate filings.
Jones wants San Francisco-based Blue Shield to accept a 60-day postponement beginning March1, but he has no authority to force the issue. He also has asked Aetna Inc., Anthem Blue Cross and PacifiCare to delay pending rate increases and is in discussions with them.
The insurance commissioner has limited power to block increases, something he can do only in cases where an insurer spends less than 70% of premium income on healthcare expenses. Still, Jones said his department actuaries would conduct a "full and complete review" of Blue Shield's March 1 filing.
"I'm not sure Blue Shield is well served, and I'm not sure Blue Shield's policyholders are well served, by their decision not to delay their rate increase," Jones said. "I'm disappointed they didn't comply. I think it was a reasonable request."
Policyholders already angry over multiple rate increases voiced anger over Blue Shield's decision.
"It's arrogance," said longtime member Adam Rosen, 41, of Encino. "It's irresponsible of them."
For its own review, Blue Shield is using an actuarial firm the state hired last year to examine rate filings by several insurers after Anthem Blue Cross provoked a backlash with proposed increases of up to 39%.
Axene Health Partners, based in Riverside County, found major errors in Anthem's paperwork, which led the insurer to cancel its planned hike and accept smaller increases.
The firm also studied Blue Shield's filing but found no major problems. In a statement Friday, founder David Axene pledged to conduct his review "thoroughly and independently." The analysis is expected to take 30 to 45 days and could be finished in time for Blue Shield to proceed with its March 1 increase.
"We will apply our best professional judgment and release our findings publicly in a written report," Axene said. "We will share our work with the regulators and respond to their questions and observations prior to its release."
Blue Shield is seeking rate increases for the third time since October. Some of its 194,000 individual policyholders were notified recently that they would receive all three at once.
The first increase — averaging 19% and extending as high as 29% — came in October after a three-month delay to allow for Axene's first review. Blue Shield raised rates again Jan. 1 and is seeking the third increase on March 1. The company said the increases are the only ones policyholders will see over a two-year period.
Bodaken blamed the rising costs on the "rapid increase in healthcare expenses." Blue Shield said higher rates also are necessary to keep pace with the increased use of medical services by members and new mandates in state and federal healthcare laws.
Even with higher rates, the company said, it lost as much as $20 million on individual policies in 2010 and expects to lose as much as $30 million this year.
"We regret that our members have received significant rate increases in recent months and want to be absolutely certain that the rates reflect our actual cost of providing medical care," Bodaken said in his statement. He added that if Axene finds Blue Shield's increases unsound, "we will hold our members harmless by refunding the difference with interest."
The statement did not mention the postponement, but Blue Shield spokesman Tom Epstein said, "We're not doing a 60-day delay."
The fracas over Blue Shield's rates was heightened by a mini-drama early Friday when Blue Shield issued its statement announcing plans for the independent review before Bodaken had spoken to Jones.
Minutes after the statement went out, the company retracted it, saying it had been sent in error. After Bodaken and Jones spoke by phone, the company reissued the same statement.
"It was a mistake," Epstein said of the early release. "We had no intention of releasing it before the commissioner and our CEO had spoken."
Jones said he was satisfied with the company's explanation. "Bruce apologized," he said. "We're not pushing that."