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Believe it or n0t, but Blue Cross/Blue Shield of California, the "not-for-profit" that has attempted to raise it's rates as much as 59% in recent years - is announcing the unthinkable.

They're cutting their rates and even offering a rebate to their customers.

From the L.A. Times.

Health insurer Blue Shield of California, under fire for a series of recent rate hikes and the pay of its chief executive, plans to cut this year's premiums by 2.5% for many of its 3.3 million policyholders as part of a new initiative to hold down costs.

The nonprofit insurer, with about 10% of the California market, said the rate reduction would be applied to bills in October, resulting in $167 million in savings for nearly 2 million customers.

But the real question is - Why?

Was it because of regulatory pressure?

Consumer advocates said Blue Shield's announcement Tuesday may have been prompted by increased regulatory scrutiny. In March, the company canceled the last of three rate increases in seven months for individual policyholders amid pressure from customers and California's insurance commissioner.

Or is it part of some long term "Plan" by Blue Shield?

Blue Shield Chief Executive Bruce Bodaken, however, said the rate reduction had been in the works since August and was part of a broader effort to make health coverage more accessible.

"We really focused on this being a long-term strategic decision," Bodaken said in a conference call with reporters. "It's going to take a long time to get to universal coverage and to affordability. It is clear that even with health reform, we all need to do more."

In January of this year Blue Cross was trying to raise it's rates almost 60% only to be blocked.

He's been on the job less than a week and already California Insurance Commissioner Dave Jones has had to play hardball with Blue Shield, which just told nearly 200,000 California customers with individual health policies their rates are going up as much as 59 percent as of March 1.

"I have asked that the company postpone its rate increase 60 days in order to afford me the opportunity to fully review the proposed rate increase," said Jones. The move comes less than a year after Anthem Blue Cross tried but failed to get a 39-percent rate increase.  Blue Shield says its rate hike averages about 33 percent, but this would be the company's third rate hike since October.

Under the initiative, most of the affected customers will see their October bills cut by nearly a third, which amounts to an annualized reduction of 2.5%. Individual policyholders will see an average savings of $80 that month, and a family of four will get an average $250 reduction. October premiums for business customers will drop about $110 to $130 per employee. Blue Shield also pledged to return money to customers in future years when its net income exceeds 2% of its revenue, which amounts to $180 million this year.

Several of Blue Crosses recent rate hikes have been questioned and blocked by the California Insurance Commissioner.  So why are they suddenly going the opposite direction now?

Maybe it's because under the Affordable Care Act the Department of Health and Human Services has just announced new Rate Increase Guidelines which would could ban the types of double-digit increases that Blue Cross has made regularly.

“Health insurance companies have recently reported some of their highest profits in years and are holding record reserves,” Ms. Sebelius said. “Insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, but many insurance companies continue to raise their rates. Often, these increases come without any explanation or justification.”

Federal health officials proposed the 10 percent threshold in December. The insurance industry criticized it as an arbitrary test that could brand a majority of rate increases as presumptively unreasonable. But the administration rejected the criticism and insisted on the 10 percent standard in the final rule, issued Thursday.

In addition under the ACA the Federal Government is providing $250 Million to the states to help them comb through the financials of these companies and discover if these rate hikes are financially justified or not.

Also as i've previously diaried the ACA sets an 85% Medical Loss Ratio Cap that is retro-active and requires companies like Blue Cross who've previously gouged their customers with ridiculous rate hikes - to pay them a rebate.

[The Ryan Plan] would repeal the 85% Medical Loss Ratio Limit for Insurers in the Exchange, and repeal the leverage State Insurance Regulators currently have to block insurers who are currently gouging their beneficiaries with costs above the 85% MLR level by denying them access to the exchange and requiring that they pay REBATES to their customers for any premium charges above the 85% MLR.  This impacts us NOW, because if there aren't going to be Exchanges in 2014, there isn't any leverage to push for lower premiums with insurers today.

Lastly California State Law just might be changing soon.

Legislation passed by the California Assembly Health Committee Tuesday -- AB 52 (Feuer) -- would allow both the DMHC and the California Department of Insurance (CDI) to regulate health insurance premiums and prohibit insurers from imposing excessive rate hikes such as the Blue Cross increase taking effect on Sunday.

This bill is currently in the California Senate and if it passes will in all likelyhood will be signed by Governor Jerry Brown.

So is this really just something Blue Cross has decided to do out of the "Kindness of their blackened charred heart" or is it something they actually will soon be required to do under the Affordable Care Act and AB 52?

Will other health Insurers, hoping not to lose massive amounts of business to Blue Cross with it's shiny new lowered rates - or suffer the wrath of the ACA/Ab52 - follow suit?

Will they have a choice?


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Comment Preferences

  •  well (6+ / 0-)

    they have raised my rates a whole bunch over the last 2 years and now a token 2.5% cut looks like PR to me.

    Scientific Materialism debunked here

    by wilderness voice on Thu Jun 09, 2011 at 09:35:32 AM PDT

  •  What will the market bear? (2+ / 0-)
    Recommended by:
    james321, kareylou


    Sarah Palin 2012!!! Prove the Mayans right...

    by funluvn1 on Thu Jun 09, 2011 at 09:37:52 AM PDT

  •  Interesting diary, thanks. (2+ / 0-)
    Recommended by:
    james321, kareylou

    These vermin can't help but register the public's increasing indignation over the excesses of for-profit healthcare funding. What we took in meek silence as recently as 10 years ago, we're quite noisy and insistent about today (e.g., the new language about "universal affordable healthcare" in the national political discourse).

    For Blue Cross, it's best to act to stem the losses now. They see that the gravy train may so very soon be off the rails...

    It's here they got the range/ and the machinery for change/ and it's here they got the spiritual thirst. --Leonard Cohen

    by karmsy on Thu Jun 09, 2011 at 09:52:43 AM PDT

  •  Same thing happened in my (3+ / 0-)
    Recommended by:
    james321, jj32, kareylou

    state with the BC-BS high deductible plan-I believe the other options my have increased.  Not only did our premiums go down by over a $100 a month but they have to cover more with the Affordable Care Act.  So we're already reaping benefits.

    "Forever is composed of nows." Emily Dickinson

    by Leftovers on Thu Jun 09, 2011 at 11:03:37 AM PDT

  •  People aren't using their insurance (2+ / 0-)
    Recommended by:
    james321, kareylou

    That's probably part of the reason.  Even most of the 80-something percent of Americans who do have health insurance are under-insured.  I have pretty solid insurance compared to most (90% coverage for ER/hospital), and even I avoid hospitals unless absolutely necessary.  Last year I came down with a severe sickness, basically went to the ER for an IV and some meds and had to pay around $300 AFTER insurance out of pocket.  I'll bet this is a big reason for rates dropping.  Most people can't afford to use insurance even if they have it.

  •  This is a Blue Shield PR stunt to curry favor with (2+ / 0-)
    Recommended by:
    kareylou, trumpeter

    regulators -- it's not in the best interest of customers

    Single payer NOW!

  •  Wendell Potter: Yes, this is an epic PR stunt! (1+ / 0-)
    Recommended by:

    As the head of communications for two of the country's largest health insurers for almost 20 years, I recognize an orchestrated spin campaign when I see one. And boy oh boy did I see an award-winning one this week in San Francisco.

    The supposedly nonprofit Blue Shield of California went to extraordinary lengths Tuesday to unveil its "bold move to address the health care affordability crisis" by pledging to limit its annual profit to no more than 2 percent of revenue. And not just going forward, mind you, but all the way back to 2010 when the nonprofit's profits were considerably more than 2 percent -- so much more that Blue Shield of California says it will refund $180 million to its policyholders.

  •  My rate increase with Assurant Health (0+ / 0-)

    was the least it has been since 2004, when they began jacking up my rates. My premium went up by around $100 per month. I am so used to crushing increases that this seems like a relief. Still pretty unaffordable though.
    Can we hope that insurance companies are seeing the handwriting on the wall? and that the handwriting says "We're mad as hell and we're not going to take it any more" or at least "This is no way to run a health care system".  

    To keep our faces turned toward change, and behave as free spirits in the presence of fate, that is strength undefeatable--Helen Keller

    by kareylou on Thu Jun 09, 2011 at 12:22:27 PM PDT

    •  ooops (0+ / 0-)

      I mean $100 per quarter, which is about $33 per month. In 2000, my premium for my barely adequate--not junk but not great--policy was $200 per month. Now it is over $900 per month, and the deductible has been raised to $3000. As soon as I received a dire diagnosis, they tried to rescind, failed, then began the rate increases. I meditated and cried a little before I opened the latest envelope, only to find a modest increase and no attempt to drop me.
      I'm still mad as hell. And this is still no way to run a health care system. Getting that envelope in the mail is just about as stressful as getting the results of the latest scan. And that's just wrong.

      To keep our faces turned toward change, and behave as free spirits in the presence of fate, that is strength undefeatable--Helen Keller

      by kareylou on Thu Jun 09, 2011 at 12:29:11 PM PDT

      [ Parent ]

  •  ... (3+ / 0-)
    Recommended by:
    trumpeter, kareylou, Vyan

    IT'S A TRAP!!

    "Jesus, does President Obama start anything on time anymore? It's like being in a club and waiting for Lauryn Hill show to being."- The Rude Pundit live-whiskey blogging Obama's Big Damn Middle East Policy

    by lcj98 on Thu Jun 09, 2011 at 01:00:30 PM PDT

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