Two months after announcing its intention to raise rates for 200,000 individual plan members – with some planned increases as high as 59 percent – California Blue Shield is withdrawing its rate filing with the California Department of Insurance and instead will hold both individual and family plan rates steady for the remainder of the year.
"Our not-for-profit mission is to provide Californians with access to quality healthcare at an affordable price," said Bruce Bodaken, the CEO of Blue Shield of California. "By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times. It's a financial risk for us, but a risk that's worth taking."
[See also: Blue Shield of California proposes 59 percent rate increase; Blue Shield of California seeks outside review of proposed rate increase]
The insurer initially planned to have its rate increase take effect March 1, but public outcry – as well as pressure from California Insurance Commissioner Dave Jones – saw the company change tack. In mid-January, the company announced it was submitting its filing to a third-party for an independent review. Then, in early February, it announced it would comply with Jones' request to delay the rate increase for 60 days beyond March 1.
Jones lauded BSC's decision, and used the occasion to stump for state legislation that would allow the insurance commissioner to reject excessive rate increases – a power his office does not have under current law.
"Today's decision by Blue Shield confirms the need to give the insurance commissioner the authority to reject excessive rate hikes," said Jones. "In California, unlike in 20 other states, health insurers get to decide whether to increase health insurance rates without approval from the insurance regulator, just as Blue Shield raised rates two times and proposed to raise rates yet a third time, until today's announcement. In order to protect consumers from excessive rate hikes, I am sponsoring Assembly Bill 52, authored by Assembly member Mike Feuer, to give the insurance commissioner the authority to reject excessive rate hikes."
"Today's news is a welcome development and certainly a relief for several hundred thousand of Blue Shield policyholders in California, but it reminds us all that insurance companies hold all the cards when it comes to setting rates," Jones added.
As it has since it filed for the rate increase, BSC noted the company lost $27 million on its individual coverage in 2010 and expects to rack up more losses this year as a result of holding the line on rates. The savings to consumers as a result, the company noted, would total $35 million to $40 million.
At the same time, Bodaken praised last year's health reform legislation and blamed the escalating cost of care for the company's need to raise rates.
"We have long acknowledged that the individual health insurance market is broken and we are pleased that the rules will change in 2014," he said. "But health reform will succeed only if we restrain the rising cost and utilization of medical services that is driving premium increases."