Blue Shield of California will comply with a request by California Insurance Commissioner Dave Jones to delay planned rate hikes for nearly 200,000 individual policy holders for 60 days to allow the commissioner's office time to examine them.
Blue Shield has been under increasing public pressure for proposing the increases – some as high as 59 percent – that were scheduled to take effect March 1. It also was the last major health insurer in the state to grant Jones' request. In January, Anthem Blue Cross, Aetna, and PacifiCare agreed to refrain from increasing premiums for 60 days beyond their anticipated effective dates.
[See also: Blue Shield of California proposes 59 percent rate increase; Blue Shield of California seeks outside review of proposed rate increase]
"We want to be sure that the rates, which we filed in October, are reviewed to the commissioner's satisfaction," said Bruce Bodaken, chairman and CEO of Blue Shield of California, in a statement issued in January. "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 and meet the new medical loss ratio standard."
While Jones doesn't have the legal authority to reject rate increase requests, a new law in 2011 requires insurance companies to submit to a third-party review of rate increase proposals to show whether the increases are justified. The state insurance commissioner is also required to post the results of such audits on the department's website.
Blue Shield announced in mid-January that it had contracted with a third party to conduct such a review; officials anticipate the review will be completed before March 1, the date of the planned rate hike.
The Department of Insurance has fielded many calls from Blue Shield members concerned about the scheduled hikes.
"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," said Jones.
Blue Shield, though, maintains that even with its proposed rate hikes, it will lose money on its individual business. Further, the company said the hikes are not connected to the Affordable Care Act, but to market forces that have continued to push up medical expenses.
"This situation clearly demonstrates that the only way to reduce premium increases is to limit the explosive growth in the cost of medical care," said Bodaken. "We have long supported comprehensive health reform as a way to repair the broken individual health insurance market and to reduce long-term costs."