Blue Shield of California audit deems 59% rate hikes reasonable
Blue Shield of California insures several hundred thousand customers. In October, the insurer announced three gradual rate increases that add up to 59 percent. The state is investigating the increases, but an outside auditor is calling the increases “reasonable.”
Stepped rate increases in California
Blue Shield of California, in October 2010, announced they would be increasing insurance rates. The claim of the insurer is that these increases are in response to the rising cost of health care. The insurer also says that more people are dropping health insurance, so prices need to be increased. The first of the three increases hit on Oct. 1, with additional increases on Jan. 1 and March 1. For more than 100,000 customers, these three increases added up to a 59 percent increase in premiums.
Rate increases called ‘reasonable’
After the State of California and ratepayers raised serious concerns about the rate increases, Blue Shield of California hired an auditor. The auditor recently released his report to both the state auditors and the general public. The audit calls the 59 percent rate increases “reasonable” in the face of the increasing cost of health care, especially in California. The auditor indicates that the health insurer should be able to meet the requirement that 80 percent of premiums be spent on customers’ health care. The state auditors have raised concerns that this audit does not include all the information they had requested from the company.
State regulators have no recourse
Though the State of California does review and approve insurance rate changes, the regulators do not actually have any legal recourse. Even if the state does not approve of the insurance rate hikes, the hikes can still stick. The legislature is considering passing emergency legislation that would allow them to block the rate hikes, but the political will is likely not there. Some customers are blaming the new health insurance bill for these rate increases. The reality is, however, that Blue Shield of California is claiming that customers leaving the system — which will likely not happen once health insurance reforms are fully in effect — is the cause of the increasing costs.