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Friday, March 15, 2013, 12:20 pm

State insurance commissioner presses case for power over health premiums

Wants to be able to reject rate hikes

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    SONOMA — California Insurance Commissioner Dave Jones continued to apply public pressure on Blue Shield of California and other large insurers for recent rate hikes, saying the increases will negatively impact individuals and small businesses disproportionally and that the increases aren’t in tune with national medical inflation rates.

    Dave Jones, California insurance commissioner

    Dave Jones

    In an interview with the Business Journal between speaking engagements in Sonoma County on Thursday, Mr. Jones laid out policy prescriptions he said might help alleviate the upward pressure on premiums, which are slated to increase at an average rate of nearly 12 percent for Blue Shield policy holders, while insisting that many health insurance carriers have unnecessarily raised rates.

    Chief among his solutions included allowing the commissioner to reject what the Department of Insurance determines to be excessive rate increases, as is the case in 34 other states. 

    “Unfortunately for California, it’s one of the last states to give its insurance commissioner the ability to reject insurance or HMO rate hikes,” he said. “What’s particularly frustrating is that I can reject rates for auto insurance, medical malpractice, property-casual insurance,” and other lines.

    “This is a big missing piece of the Affordable Care Act,” he added, noting that most of health care reform won’t address the continued cost increases of health insurance for small business and individuals. 

    As of March 1, both Blue Shield and Aetna Inc. went forward with rate increases of nearly 12 percent on some 268,000 policy holders, despite protests from both Mr. Jones and the Department of Managed Health Care.

    Mr. Jones said he asked Blue Shield if it would consider a smaller rate increase that would have saved consumers about $16.5 million. The San Francisco-based nonprofit insurer declined.

    Steve Shivinsky, a spokesman for Blue Shield, said the  rates are reasonable for several reasons, including that its premiums are competitive with, and in some cases lower, than its competitors, and that its rate increases are lower than other recent hikes from competitors.

    “It’s important to point out that these increase are needed to keep pace with medical costs,” Mr. Shavinsky said. “Those continue to rise, particularly for the members we’re covering at  much greater rate than what’s being reported.”

    The company also said its rates reflect “the increases needed to keep pace with medical costs for our members in 2013,” arguing that the costs for hospital and physician services, prescription drugs and diagnostic tests continue to rise.

    Under the Affordable Care Act, all insurers must meet a federal medical loss ratio, requiring 80 percent of all premium dollars be spent on care, and not administrative costs or executive compensation. Blue Shield said its rates comply with the law, and that is has lost tens of million of dollars in the individual market recently.

    Mr. Jones rejected the arguments on medical cost increase.

    “In fact, the recent data indicate that medical costs nationally are going down,” Mr. Jones said.

    Mr. Shavinksy said Blue Shield shares the  concerns of state regulators, but that the individual market in California has seen higher than national averages on medical spending. Blue Shield does not think granting the insurance commissioner the authority to reject rate hikes is necessary, pointing to measures in Obamacare that require 80 to 85 percent of all premium dollars are spent on care.

    “I think there are ample restrictions in place already,” Mr. Shavinsky said.

    Although health care reform takes effect in 2014, including the state’s online health exchange, Covered California, Mr. Jones said his inability to regulate proposed health insurance premiums will negate much of the Affordable Care Act’s aims.

    “It’s very disappointing, and very frustrating for small businesses and families who continue to get walloped by these rate increases,” he said, adding that it’s not just Blue Shield, but other carriers as well. 

    As health reform takes shape, there are a few glimmers of hope, but very little that will contain premium costs, particularly for small employers, who will need to decide if they should purchase employee health plans or refer employees to Covered California, Mr. Jones said.

    Covered California will be split into two categories, one for individual polices and another for small business with 50 or fewer employees. What remains to be seen, however, is just how many carriers will agree to offer plans in the exchanges, which could significantly affect the pricing of plans. Early signs point to fewer carriers in the employer-side of the exchange, Mr. Jones said. 

    All of this underscores the need to allow the insurance commissioner to reject rate hikes, Mr. Jones said. A 2014 ballot initiative would do just that, and Mr. Jones said the current state Legislature lacks the political will to accomplish that goal on its own.

    “It’s only going to happen if the voters enact it,” he said.

    The commissioner also touched briefly on workers compensation rates, which similarly have increased over recent years. Last September, the state passed SB863, which aims to reform the system by changing how benefits are calculated for injured employees. It creates a binding-arbitration process to resolve disputes over coverage and eliminates coverage for certain conditions prone to more litigation, such as mental health issues and insomnia. The bill also seeks to prevent disputes with providers over payment, known as liens.

    Like with health insurance rates, the commissioner does not have the ability to reject carrier’s workers comp rates, although he issues an advisory rate every year. He said the new reforms would hopefully eliminate the need for his department to regulate those rate increases, and that the benefits of the bill will be known later this year.


    Correction, March 18, 2013: Insurance Commissioner Dave Jones asked Blue Shield of California if it would consider a smaller rate increase that would result in $16.5 million in savings for policyholders. The original story had an incorrect figure.

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