Time for California to start a rate hike revolution

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It just doesn't stop--insurers continue to increase premium costs at alarming rates (pun definitely intended) and there's not much state or federal officials can do to stop it.

The most recent offender is Blue Shield of California, which has proposed to hike individual premiums by an average of 12 percent and a max of 20 percent, the Los Angeles Times reported. This double-digit rate hike comes despite Blue Shield's surplus that is threefold the amount the Blue Cross and Blue Shield Association requires its insurers to maintain.

In fact, Blue Shield's reserves have soared 77 percent, from $2.2 billion in 2006 to $3.9 billion in September, outpacing its 19 percent growth in annual revenue during the same time. "Reserves are needed to ensure our members' claims can be paid no matter what," Blue Shield Spokeswoman Lindy Wagner told the newspaper. "We need them to protect against uncertainties like a pandemic or another crisis."

But this isn't the first time Blue Shield has come under fire for its exorbitant rate increases. Last April, the San Francisco-based insurer proposed a cumulative rate hike averaging 37.5 percent for 70,000 policyholders. That followed an 18.8 percent increase that went into effect in January and another 15.8 percent hike that went into effect in October.

As we've seen in the past, Blue Shield doesn't exactly respond well to regulator or public pressure to rescind or, at the very least, decrease high rate increases. Despite California Insurance Commissioner Dave Jones's request to delay the proposed rates, Blue Shield pushed back hard, only acquiescing after a public protest was held in front of its headquarters (although the insurer denied the protest played any role in its decision to delay the rate hike).

Blue Shield did eventually drop the rate hike altogether after several months of intense back-and-forth exchanges with the state's health regulators. 

But back to the original point of this column. Blue Shield, which alleges the most recent rate increase is needed to offset money it expects to lose in the individual insurance market, isn't subject to any real oversight when it comes to insurance premiums.

California's insurance commissioner has no authority to reject excessive increases to premium rates. And given that California is a leader in the healthcare industry, as many states and sometimes even the federal government often follow its regulatory lead, this is a big deal. Maybe if California's health officials could actually throw down the gauntlet at these brazen insurance companies, requiring them to justify the rate increases and even block any unnecessary ones, the trend would spread throughout the country.

Of course, several states already have authorized their health regulators to deny premium hikes, but they rarely do so. Given California's proclivity for keeping big business in check, its state leaders likely would take more stringent steps than their counterparts in other areas of the country.

I'm not saying insurers should never be allowed to increase rates; that's obviously a necessary part of doing business. But I sure would like to see some regulators hold insurance executives' collective feet to the fire, forcing them to think twice before they propose rate hikes. I think it's a start in the right direction as the industry moves toward a more consumer-oriented marketplace.

That's why I want a revolution. And I think it should start in California. - Dina (@HealthPayer)