Blue Shield of California must explain rate hikes

California's Department of Managed Health Care wants Blue Shield of California to explain why roughly 70,000 policyholders received a cumulative rate increase averaging 37.5 percent, reports the San Francisco Chronicle. In a letter to the insurer, the state department said it has serious concerns about an 18.8 percent increase that went into effect Jan. 1, and a previous hike of 15.8 percent that went into effect Oct. 1.

DMHC is "extremely concerned" about the impact of double-digit increases on consumers within two short months, the letter states. Further, DMHC wants to know why Blue Shield raised rates when policymakers and the public have "vigorously protested" similar high rate hikes.

"Our action today helps to further rein in the 'wild west' of rate increases for consumers in the individual health coverage market," says DMHC spokesperson Lynne Randolph.

California's health regulatory environment has consumer healthcare policies overseen either by the Department of Managed Health Care or the Department of Insurance. DMHC wants Blue Shield to explain why the rates for its DMHC-regulated plans are so much higher than plans regulated by the Department of Insurance. DMHC asked Blue Shield to respond within seven business days.

Tom Epstein, a vice president with Blue Shield, says the rate increases reflect "the rapidly rising cost of medical care for our individual and family plan members" and that the insurer lost money on its individual California business in 2010 despite these increases, notes the Chronicle. "Since the rates reflect the actual cost of rising medical expenses and are expected to meet state and federal medical-loss ratio requirements, they are reasonable and justified," he adds.

To learn more:
- read the San Francisco Chronicle story
- see the Associated Press article
- read the California Department of Managed Health Care letter (.pdf)

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