By Steve Schulte of
Health Advocate Solutions
Respond to (213) 999-1227
On February 1 Blue Shield of California corporate headquarters released a statement announcing that they---changing their previously stated position---would abide by Insurance Commissioner Jones' (CA) request to delay any rate hikes for 60 days.
This delay of proposed rate hikes on individual policies (by as much as 59%) for 60 days will allow the Department of Insurance to review BS's effort to raise rates.
This was dramatic, given that, only a few weeks before, Blue Shield spokesman Tom Epstein had stated emphatically and brusquely that the company would NOT back down. This despite agreements from Anthem Blue Cross, Aetna and others to abide by the Commissioner's request concerning their new rate hikes for 2011.
Amidst the public outcry (and, frankly, anxiety) about BS's proposed rate hikes it is important to look more closely at whether the hikes can be justified. While some annual increase might be necessary for sound business reasons the current request is baffling.
First, BS initially responded to protests that they were retaining an outside auditor to review the hikes and would report unilaterally the outcome. It seems strange that such a move was not taken before announcing the hikes given their scope.
Second, the insurer says, predictably, that the costs are due to "rising medical and claims costs". But this seems unlikely, at least in being new.
Healthcare inflation is higher than the rate for other goods and services, but not 50+% higher. Additionally, it seems doubtful that individual claims could have risen at an equivalent amount in just several months. (BS and other insurers were given rate hikes in CA last fall.....).
So, if healthcare and claims cost changes cannot explain BS's decision to raise rates, what is the likely explanation?
Given the secrecy and lack of transparency with which most large corporations---and certainly insurers---operate, it's difficult to "get into the thinking" of BS actuaries, underwriters and financial experts who look out for the bottom-line considerations.
But some causes for the rate hike are very likely. These include:
1) Preparation by BS and other insurers for the health care law changes that will require everyone to be covered despite any pre-existing conditions (2014). Thus, a strong defense and indirect challenge from insurers since many more people---including many sicker people now excluded--will have to be covered.
2) A move to drive people off of current insurance policies so they will join state exchanges that will cover the "hard to insure" as these mandated exchanges (under the new health law) are set up. Higher costs would do just that.
3) A more cynical move to game the system by increasing prices and bureaucratic hurdles so that the average person will turn against the healthcare law---feeling that it is worthless and ineffective. AND, forgo insurance altogether.
Whatever the real reasons---and what I have cited are very likely causes---changing to universal healthcare coverage is complicated and difficult. No one should underestimate this.
But if insurers want to "keep skin in the game"---and avoid a press for, say, universal Medicare or a single payer system, they should be finding ways to INCEASE ACCESS TO COVERAGE, MAKE IT MORE AFFORDABLE AND EASIER TO OBTAIN rather than more difficult.
Clearly BS does not have this mindset. My advice: change direction and and work to help get everybody covered.
Plus, President Obama, Secretary Sibelius and Governor Brown (as well as other governors) should take note and join Commissioner Jones in fighting moves like this to increase rates in a lopsided and hostile fashion. Such attention would bolster public confidence both in the new healthcare law and in our current insurance system.
I welcome your comments.
Sources: LA Times, NY Times, Wall Street Journal, Kaiser Family Foundation.
To respond to this blog, email steve6schul@yahoo.com
