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Blue Shield of California rate increase prompts criticism

January 5, 2011 |  3:17 pm

Stethoscope-2 Another one of California’s largest health insurers has stunned individual policyholders with news of huge rate increases -- this time it’s Blue Shield of California seeking hikes of as much as 59% for tens of thousands of customers March 1.

Blue Shield’s plan comes less than a year after Anthem Blue Cross tried and failed to raise rates as much as 39% for about 700,000 California customers.

San Francisco-based Blue Shield said the increases were the result of fast-rising healthcare costs and other expenses resulting from the new healthcare laws passed last year. “We raise rates only when absolutely necessary to pay the accelerating cost of medical care for our members,” the company told its customers last month.

In all, the insurer said that 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October that have been rolled into one for about 7,000 members.

Nearly one-quarter of the affected customers -- 44,000 -- will see cumulative increases of more than 50% over five months.

Blue Shield notified some policyholders of the rate increases in late December. That’s when Michael Fraser, a longtime Blue Shield policyholder from San Diego, learned that his monthly bill would climb 59%, to $431 from $271.

“When I tell people, their jaws drop and their eyes bug out,” said Fraser, 53, a freelance advertising writer. “The amount is stunning.”

The increases prompted complaints to new Insurance Commissioner Dave Jones, criticism on the Internet and letters to The Times. They are providing an early test for Jones, a former Democratic state assemblyman who targeted Anthem last year after it sought its big increases. . . .

Jones said the Blue Shield premiums underscore the need for the Legislature to give the insurance commissioner legal authority to regulate insurance rates the same way he does automobile coverage.

At present, the commissioner can block increases only if insurers spend less than 70% of premium income on claims. Jones’ office said that Blue Shield’s March 1 increase is still under review.

“Blue Shield’s increases pose the same problem posed by Anthem Blue Cross last year and other health insurers as well,” Jones said in an interview. “My hope would be that Blue Shield would reexamine these rate hikes, particularly in the face of the impact they are having on individual policyholders.”

Blue Shield said the cost of health coverage is being driven up by large hospital expenses, doctors' changes and prescription drug prices. Blue Shield spokesman Tom Epstein said other factors also contributed to three increases in five months.

On Oct. 1, he said, Blue Shield imposed increases averaging 18%, and reaching as high as 29%. Those hikes had been delayed for three months while state regulators examined Blue Shield’s filing, costing the company tens of millions of dollars.

Epstein said Blue Shield raised rates again Jan. 1 to pay for reforms under the national healthcare overhaul and a new state law that bars insurers from charging women more than men. (Some policyholders will pay less under the state gender law, while others will pay more.)

A third round of hikes scheduled for March 1 comes in response to rising healthcare costs, he said. Those increases will average 6.5% and be as high as 18%.

Some policyholders have seen their bills rise gradually over the last five months, while others will see the charges lumped together March 1.

“It’s unfortunate that they all came in a five-month period,” Epstein said. “Rates are going to continue to rise unless the cost of medical care is brought under control. We need to reduce what we pay to hospitals, medical groups and pharmaceutical companies.”

Despite the large increases, Epstein said Blue Shield would again lose “tens of millions of dollars” on its individual business in 2011.

Not included in the rate increases are 78,000 Blue Shield individual policyholders whose insurance is regulated by a second state agency, the Department of Managed Health Care. Those customers have seen two rate increases since October that together average 37%, Epstein said.

[Update: To read an updated version of this report, go here.]

-- Duke Helfand

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