Non-profit health insurer Blue Shield of California said it would withdraw its request seeking higher rates for individuals after receiving harsh criticism from regulators and consumers.
According to a report in The New York Times, Blue Shield’s change of heart will come as welcome relief, as some individuals would have seen their rates increase as much as 87%. The insurer’s retreat is reminiscent of last year’s move by commercial insurer WellPoint, which originally announced huge premium increases, only to reverse course after a sharp rebuke in the court of public opinion and being called out by President Obama.
Naturally, Blue Shield tried to put the best face on it: “By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times,” its CEO said in a statement. But the flip-flop could make it difficult for other insurers in California and in other states to raise premiums sharply as well, the New York Times reports, citing various analysts and advocates.
Under the one-year-old federal health care law, state regulators must pay closer attention to what insurers charge for policies and Blue Shield’s course reversal demonstrates that the law will help keep premiums reasonable, some advocates assert. “What it shows is that scrutiny matters,” Anthony Wright, the executive director of consumer advocate Health Access California, told the Times.
At the same time, Blue Shield’s action also demonstrates that insurers are able to absorb the losses associated with selling individual coverage because they are generating profits in other markets, such as selling coverage for employers. “It’s a reflection of how well Blue Shield and the industry are doing in their overall business,” Carl McDonald, an industry analyst for Citigroup, told the Times.
While federal law allows review of proposed rates, only some states have actually enacted legislation to give regulators the authority to deny increases they consider excessive or unreasonable. California is one state still considering giving regulators a stronger hand.
Until that authority is granted, insurers can go ahead and raise rates whether or not they are justified, according to the California state insurance commissioner Dave Jones, “At the end of the day the health insurers hold all of the cards. They get to decide.”
Siding with Jones is Secretary of Health and Human Services Kathleen Sebelius, who responded to Blue Shield’s announcement by saying: “We believe that insurance commissioners should have rate approval authority and will continue to support states’ efforts to review premium increases and protect consumers.”