Blue Shield Plans to Raise Individual California Premiums as Much as 59%

Nonprofit insurer Blue Shield of California submitted a proposal to raise rates on individual policyholders by as much as 59 percent beginning March 1.

The San Francisco-based company said the increase was necessary because of rising provider fees, greater use of medical services by its members, and “the fact that healthier people are dropping coverage during a bad economy,” Johnny Wong, a company spokesman, said today in an e-mail.

The increase comes less than a year after WellPoint Inc.’s Anthem Blue Cross unit tried to raise rates in California as much as 39 percent for those who buy individual policies. Eventually, the company lowered the proposal to an average 14 percent increase. WellPoint executives were called before Congress to explain the plan.

“Even with these rate increases, Blue Shield of California expects to lose tens of millions of dollars on its individual health care business in both 2010 and 2011,” Wong said in the e-mail.

California Insurance Commission Dave Jones, who took office Jan. 3, urged Blue Shield to delay the rate increases for 60 days. U.S. Health and Human Services Secretary Kathleen Sebelius said her office stands “ready to assist” Jones in his effort to analyze Blue Shield’s proposal.

Double-Digit Increases

California families and businesses are still suffering from the recession and “yet year after year we continue to be hit by these double-digit increases from insurers and managed care plans,” Jones said today during a press briefing.

“These premium increases will impose significant financial burdens on struggling families and, in some cases, will lead to the loss of health-care coverage altogether,” Jones said.

While Jones can review rates filed by insurers, his office doesn’t have the authority to reject proposed increases it deems unreasonable. The commissioner said he is working with state lawmakers to gain the power to block such increases.

About 193,000 policyholders will see higher rates that will average about 30 percent, Blue Shield’s Wong said. He couldn’t cite a number for those who would face the 59 percent increase. Blue Shield of California has about 3.3 million members, he said.

The increases “have almost nothing to do with the federal health reform law,” and “reflect trends that were building long before health reform,” Wong said in the e-mail.

Use of Services

All of Blue Shield’s business is located in California, which is why the insurer hasn’t experienced the slowdown in use of services that other insurers led by UnitedHealth Group Inc. and WellPoint have reported, Wong said.

“Although some parts of the country have experienced a drop in utilization, we have not seen that reduction in California,” Wong said in an e-mail. “In fact, because healthy lives are dropping out of the risk pool due to affordability issues, we have seen upward pressure on our core trends.”

He said the company’s book of business for individual policyholders continues to experience increased utilization in the 3 percent to 5 percent range and unit cost increases in the 7 percent to 9 percent range.

“Together those factors are driving core trends into double digits,” said Wong.

The U.S. government reported yesterday that spending by private insurers increased 1.3 percent in 2009 from 2008 while overall health-care spending rose 4 percent, the slowest annual rate of growth since analysts began tracking data in 1960.

Blue Shield will be paying at least 80 percent of its premiums on medical services, even with the new rates, Wong said.

Jones, on his first day in office, raised the amount of money insurers in California are required to spend on medical care from premium revenue to 80 percent from 70 percent to comply with new regulations under the 2010 federal health overhaul. Blue Shield said its new premiums would be in compliance.

To contact the reporter on this story: Pat Wechsler in New York at pwechsler@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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