SACRAMENTO, CA – Facing continued public outcry and pressure from the California Department of Insurance, two of the state's largest health insurers have scaled back or eliminated their plans to raise rates in 2011.
In mid-March, Blue Shield of California announced that it would shelve plans to raise rates for 190,000 subscribers to its individual insurance line. Less than a week later, Anthem Blue Cross scaled back a planned rate hike that would have affected nearly 600,000 family plan subscribers and delayed planned increases in co-payments and deductibles until 2012.
The announcements also renewed the efforts of Insurance Commissioner Dave Jones to get state legislation passed that would allow him to deny proposed rate increases he deems excessive.
"Many of the Anthem policyholders who contacted my office about Anthem's latest rate filing were unaware that as insurance commissioner I lack the authority to reject excessive rate hikes. That continues to be the case," said Jones. "Insurance companies get to set their rates and I can only request that they make a change, which is not the system that consumers want or deserve."
Prior to serving as commissioner, Jones three times pushed legislation to give the Department of Insurance that power, one it already has for other lines of insurance in the state, including homeowners and auto insurance.
In the case of Blue Shield of California, the 59 percent increase for some members, as touted in the press, was misleading, noted Paul Markovich, the company's COO. Those numbers, which applied to a thin slice of the company's 190,000 subscribers who would have been affected, marked the cumulative effect of three separate increases dating back to July 2010, he said.
"In terms of the rate increase we put in place in March, the average rate increase was six-and-a-half percent and the largest increase anyone would have seen had we put it into place would have been 18 percent," Markovich said. "When you talk about those large numbers, they were the outliers, not the average."
In February, Blue Shield submitted its proposed increase to an independent actuarial firm. According to Markovich, that audit showed the insurer's work to be accurate and the rate increases justified. But taking into account the continued scrutiny and public sentiment, the company decided to forego seeking those increases.
"This was becoming an enormous distraction from the mission we are passionate about as a non-profit, which is to assure that all Californians have access to quality care at an affordable price," Markovich said. "We are committed to reform and we felt that we couldn't show that simply with words. It required a bold action and this is the action we took."
In the case of Anthem Blue Cross' plans, the proposed increases were smaller, but still placed the company under scrutiny. Anthem was seeking a 9.8 percent average premium increases for 2011, along with increases in co-payments and deductibles.
There was disagreement between Anthem and the Department of Insurance over the size of the effective hike. Taking into account the increases in co-payments and deductibles, as well as incremental monthly increases based on the company delaying implementation of its rate plan, Jones said the effective average increase totaled more than 16 percent.
Instead, Anthem will increase rates by 9.1 percent on July 1 and withhold planned increases to co-payments and deductibles until Jan. 1, 2012. The effect, Jones noted, would be a savings of more than $40 million for Anthem members.
"We are the largest health plan in the state of California, and our mission is to ensure quality healthcare for residents of the state at the most affordable price," said Anthem President Pam Kehaly in a statement. "We are pleased with the resolution of this matter, but feel all stakeholders in the healthcare market in the state must do more to control the unrelenting rise of underlying healthcare costs."
Anthem Blue Cross, which noted its losses for 2010 on individual policies were near $110 million, will also lose money on this segment of business in 2011, officials said. Likewise, Blue Shield of California said it lost $27 million on its individual insurance business last year and expects to rack up losses again in 2011.
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