Department of Managed Health Care Probes Blue Shield About Rate Hikes
California's Department of Managed Health Care recently sent a letter asking Blue Shield of California to explain why about 70,000 individual policyholders faced an average cumulative rate increase of 37.5% on Jan. 1, the San Francisco Chronicle reports.
In March, Blue Shield called off planned rate hikes that would have resulted in cumulative increases of up to 87% for some policyholders.
The health plan also pledged not to raise rates for its individual policyholders for the remainder of 2011.
DMHC now is examining Blue Shield rate hikes that already have taken effect. The department asked the insurer to justify why rate increases of 18.8% in January and 15.8% in October 2010 were not "unreasonable."
DMHC requested that Blue Shield provide a response within seven business days.
Blue Shield's Stance
Tom Epstein, a vice president with Blue Shield, in a statement said that the rates are reasonable because they "reflect the actual cost of rising medical expenses and are expected to meet state and federal medical-loss ratio requirements" (Colliver, San Francisco Chronicle, 4/20).
Starting Jan. 1, 2011, the federal reform law instituted aÂ medical-loss ratio rule requiringÂ individual health plans to spend at leastÂ 80% of premiums on medical care and quality improvement efforts (California Healthline, 1/26).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.