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Consumers Union: Blue Shield of California should not hike rates

Consumer Reports News: January 18, 2012 01:08 PM

Consumers Union, the advocacy arm of Consumer Reports, has called on Blue Shield of California to drop plans to hike premiums for some customers starting in March.

Consumers Union filed comments on Blue Shield’s rate plan with the Department of Managed Health Care, raising concerns about Blue Shield's third double-digit rate hike in the past three years. Consumers Union’s comments are based, in part, on an actuarial analysis by AIS Risk Consultants.

Last year, Blue Shield said it planned 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 reports.

The rate hike to take effect in March comes on top of last year’s average increase of 17.6 percent for the same customers. The average increase in 2010 and 2011 combined was 37.5 percent.

According to Consumers Union, Blue Shield continues to raise rates despite having a surplus of approximately $3.3 billion.

Sondra Roberto, staff attorney for Consumers Union said in a statement to the press:

California cannot afford to have more uninsured and underinsured residents. 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.

Consumers Union reports that Blue Shield’s rate filing appears to inflate its costs to justify the rate hike scheduled for March. 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.

Roberto said that these credits are a step in the right direction, but offer no relief to consumers who may have to drop their coverage because of rate hikes.

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.

Consumers Union Urges Blue Shield of California to Withdraw Rate Hike
[Consumers Union]

Maggie Shader

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