CU urges Blue Shield of California to drop rate hike

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January 17, 2012

Consumers Union Urges Blue Shield of California to Withdraw Rate Hike

Rate Hike Expected to Force More Than 30,000 Californians to Drop Blue Shield Coverage

SAN FRANCISCO, CA – Consumers Union called on Blue Shield of California to drop its plan to hike premiums on some of its customers beginning March 1. Blue Shield announced late last year that it intends to raise premiums an average of 14.8 percent or up to an average of $979 per year for almost 56,000 individual and family plan members.
Consumers Union filed comments on Blue Shield’s rate plan with the Department of Managed Health Care (DMHC) that raise serious concerns about the insurer’s third double digit rate hike in the past three years. This latest rate hike is on top of last year’s average increase of 17.6 percent on these same health plans. The average increase in 2010 and 2011 combined was 37.5 percent. Blue Shield continues to raise rates despite having approximately $3.3 billion in surplus. Consumers Union’s comments are based in part on an actuarial analysis by AIS Risk Consultants.
“California cannot afford to have more uninsured and underinsured residents,” said Sondra Roberto, staff attorney for Consumers Union (www.PrescriptionForChange.org). “Blue Shield’s rate hike will force more than 30,000 Californians to drop their coverage. Many Blue Shield customers will not be able to find insurance elsewhere or will be forced to settle for high deductible health plans.”
In its comments to the DMHC, Consumers Union noted that Blue Shield’s rate filing appears to inflate its costs to justify this latest rate hike. Blue Shield projects that it will require premiums that are 96.3 percent higher than the actual historical claims costs for the plans. The insurer also projects an increase in administrative costs of 30.8 percent above the administrative costs included in its January 2011 pricing, with no explanation for the increase in its filing.
The nonprofit Blue Shield made news last year by pledging to cap its net income at 2 percent. This has resulted in the insurer issuing $475 million in premium credits based on revenue collected in 2010 and 2011. But these credits won’t go to customers who end up dropping their coverage as result of the premium hike.
“These credits are a step in the right direction for consumers, but offer no relief to consumers who will be forced drop their coverage because of this latest rate hike,” said Roberto. “Instead of inflating its costs on the front end and issuing credits at the end of the year, Blue Shield should base its rates on more reasonable cost projections.”
Michael McCauley – mmccauley@consumer.org, 415-431-6747, ext 126