warning Hi, we've moved to USCANNENBERGMEDIA.COM. Visit us there!

Neon Tommy - Annenberg digital news

Blue Shield Rate Hike Proposals Draw Liberal Anger

Paresh Dave |
January 6, 2011 | 4:55 p.m. PST

Executive Producer

Health insurer Blue Shield of California's plan to increase premiums for a couple hundred thousand people by as much as 59 percent drew criticism Thursday as far away as Washington, D.C. while local experts called the proposal unjustified.

The company says cost increases justify the premium hikes, but that the extra costs aren't tied to the new federal health care reform law. The U.S. House of Representatives is expected to vote to repeal the law on Wednesday--a largely symbolic maneuver that is not expected to be matched by the Senate.

Anthem, a California health insurance provider slightly larger than Blue Shield, had to scale back a 39 percent increase plan last year after regulators found they had made several errors in their financial calculations. Anthem ended up doing a 14 percent average increase in October and will tack on another 10 percent more on average April 1; the company also plans to withdraw some benefits. Blue Shield's proposal will endure a 30-day review, but California's insurance commissioner does not have the power to completely block an premium increase.

A pair of experts on health insurance at UCLA said it's difficult to predict if Blue Shield will back down from some increases set to go into effect March 1, but both were surprised that the company would make such a move while the economy is still struggling.

Blue Shield says they are being forced to pay more to doctors and hospitals, are seeing more people take advantage of benefits offered in coverage plans and are being dropped by healthy people who can't afford health insurance because of the bad economy. 

"There arguments don't hold any validity," said Gerald Kominski, professor of public health and associate director of the UCLA Center for Health Policy Research. "I don't disagree with any of those statements, but taken together I don't see any evidence that it all adds up to a 60 percent increase in costs."

On average, the Associated Press says "a 30 percent cumulative increase will affect nearly 200,000 policies," amounting to about $200 a month extra for some.

Nationwide, health insurance premiums increased 1.3 percent in 2009, the slowest growth rate ever recorded, according to a Department of Health and Human Services report released Wednesday. The report found health care spending swiftly declined after the recession to a 50-year low.

The report also confirmed that millions are dropping health insurance a couple years before a health insurance mandate comes into place.

Kominski doubted that Blue Shield would have absorbed the impact of all of the drop-outs in California.

"You would have had to have a wholesale fleeing of healthy individuals from Blue Shield, but that still comes nowhere close to the magnitude of the increases they are seeking," he said.

Anthony Wright, head of Health Access California, a statewide health care consumer advocacy group, also said Blue Shield's math doesn't make sense. 

"Blue Shield blames medical costs, but medical inflation, as high as it is, is nowhere near 59 percent," he said in a press release. "That's why state regulators need more tools to scrutinize these rates and deny them if need be."

In California, this second public firestorm against increases may give momentum to AB 52--a proposal to increase the power of the state insurance commissioner--and unleash a flurry of spending on lobbying in Sacramento.

"This is all one more illustration of why the state legislature needs to move forward with enabling the rigorous review called for by the new health care law," Kominski said.

The Patient Protection and Affordable Care Act sets aside $250 million for "state insurance departments to improve their process for reviewing proposed rate increases."

AB 52, sponsored by Assemblymember Mike Feuer (D-Los Angeles), would require health care service plans and health insurers to get permission from the Department of Managed Health Care or the Department of Insurance before raising health care premiums, copayments, or deductibles. 

California Insurance Commissioner Dave Jones has called for a 60-day delay of the Blue Shield increases. An e-mail sent Thursday afternoon asking Governor Jerry Brown's press team if the governor will make it priority to push the Legislature to enact reforms has not yet been responded to.

As an assemblymember, Jones co-sponsored legislation similar to AB 52 last year with Feuer, but it was defeated in the state senate.

Shana Alex Lavarreda, director of health insurance studies at the UCLA Center for Health Policy Research, said both Republicans and Democrats would see what they want in the situation: Republicans calling it an overburdening of industry with regulations and Democrats viewing it as another example of profit-hungry enterprises stepping on customers.

U.S. Health and Human Services Secretary Kathleen Sebelius as well as three Democratic representatives from California--Henry Waxman, George Miller and Pete Stark--denounced the increases.

“Rate increases like these show that the individual insurance market is broken and won’t be totally fixed until new exchanges open in 2014,” said Rep. Waxman.  “The whole point of the new health reform law is to bring competition and transparency into the market, and make sure it serves a broad selection of people.  It is essential that these reforms stay in place to get these premium increases under control.”

Sebelius called on customers to demand their state legislators to strenghten the insurance commissioner's role.

"They should contact the governor of their state, and the state legislature demanding those laws be changed," she told ABC News.

The California Public Interest Research Group is leading an online petition drive to get commissioner Jones to call for hearing where Blue Shield publicly testifies about the reasons for the increases.

"Insurance companies shouldn’t be able to jack up our rates more than 50 percent at the drop of a hat, and we certainly shouldn’t have to trust their word that their hikes are reasonable," the CALPIRG note reads.

Kominski said Blue Shield must have made a deliberate decision that they could go through with the trio of increases and weather the storm of public outcry.

"Why else would a company willingly invite public outrage," he said.

While Anthem's proposal helped fuel the final support needed to pass the health care reform law, Blue Shield's debacle could end up igniting early support for starting programs the law funds.

Reach executive producer Paresh Dave here. Follow him on Twitter: @peard33.



Craig Gillespie directed this true story about "the most daring rescue mission in the history of the U.S. Coast Guard.”

Watch USC Annenberg Media's live State of the Union recap and analysis here.