Blue Shield of California has announced it will work with an outside actuarial firm to examine its proposed rate increase for 194,000 individual members, some of whom would see their rates increase by as much as 59 percent.
The announcement comes amid backlash over its rate increases and a call by new state Insurance Commissioner Dave Jones to delay increases for 60 days beyond the planned effective date to allow his office to conduct a review.
Instead, Blue Shield will use David Axene of Axene Partners, the same firm that conducted a review for Anthem Blue Cross last year when that company proposed some rate hikes as high as 39 percent.
"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," said Bruce Bodaken, Blue Shield's chairman and CEO.
While the company has agreed to make refunds available to customers should their rates prove to be unsound after review – a move Bodaken called "unprecedented" – the company will go ahead with its planned increases on March 1.
In a statement, Jones said the hiring of an independent actuary is already required by a new state law, SB 1163, that became effective on January 1. He expressed his disappointment that Blue Shield would not honor his request to delay the increase for 60 days beyond March 1.
"I made that request in light of the fact that I had been sworn in only for 72 hours and wanted to make sure that I have the time needed to review their rate filing for compliance with (the) new state law," he said. "SB 1163 requires the insurance commissioner to review the reasonableness of health insurance rate increases. It does not give the insurance commissioner the authority to reject unreasonable rate increases. Despite Blue Shield's unwillingness to delay their rate increase, the Department of Insurance will conduct a full and complete review of their rate filing."
Axene's review is expected to take 30-45 days, which would allow it to be completed before the planned increase. According to information supplied by Blue Shield, Axene will examine whether the rates are "excessive, unjustified or unfairly discriminatory," which are the same standards that the Department of Health and Human Services proposed last month to help states manage insurance rate increases.
Despite the proposed rule from HSS, the department has remained silent on the current rate increase flap.
Bodaken maintains the increases are the result of "the rapid increase in healthcare expenses for our members." Even with the increases, the company contends it will lose $10 million to $20 million on its individual business in 2010 and an additional $20 million to $30 million this year.
Jones, meanwhile, will continue to push for the authority for the insurance commissioner to reject rate increases proposed by health insurers.
"The Blue Shield rate increase underscores the need for the Legislature to give the insurance commissioner the authority to reject excessive premium increases," he said. "I do not have that authority now."
A bill has been introduced in California again for this session to do just that.