Blue Shield Rate Hike

[DOT]

http://money.cnn.com/2011/01/07/news...hike/index.htm

The article is on proposed rate hikes by Blue Shield of California. But it includes the following statement: "Under California law, the state insurance commissioner has no authority to reject excessive premium increases."

I was quite surprised to read that. I work in P&C, and it is my understanding that the California DOI can reject proposed rate changes. I mean, we submit filings to them, they sometimes ask us questions, and then they either approve or disapprove the filing. As far as I know, they are a "prior approval" state (at least for P&C).

Can anyone shed some light on this issue?

[Wasp]

Originally Posted by DOT

http://money.cnn.com/2011/01/07/news...hike/index.htm

The article is on proposed rate hikes by Blue Shield of California. But it includes the following statement: "Under California law, the state insurance commissioner has no authority to reject excessive premium increases."

I was quite surprised to read that. I work in P&C, and it is my understanding that the California DOI can reject proposed rate changes. I mean, we submit filings to them, they sometimes ask us questions, and then they either approve or disapprove the filing. As far as I know, they are a "prior approval" state (at least for P&C).

Can anyone shed some light on this issue?

More than likely he has no authority to reject the rate increase out of hand if it is based on valid experience and actuarially sound.

I'm sure he could reject the rate increase if the Blues just made up an increase and arbitrarily wanted more money, but since this isn't the case then maybe he has no authority to deny the needed increase.

Which raises the other point, why does the media always demonize the insurance companies (like Obama) instead of looking at the drivers of the cost increase (doctors and hospitals increased rates - sometimes justified due to malpractice cost and lame reimbursements by Medicaid and Medicare creating cost shifting to private payers, government mandates of unlimited heroic care and other unneeded benefits)?

[cincinnatikid]

I'm far from an expert, but I believe that as long as the rate increase is technically sound and meets the state's loss ratio requirement (maybe 70%), the CDI cannot reject the increase.

[Wasp]

Originally Posted by cincinnatikid

I'm far from an expert, but I believe that as long as the rate increase is technically sound and meets the state's loss ratio requirement (maybe 70%), the CDI cannot reject the increase.

You are a little too slow.

[DanielSong39]

The solution is to not buy Blue Shield insurance...

[cubs1969]

Originally Posted by Wasp

Which raises the other point, why does the media always demonize the insurance companies (like Obama)...

I wasn't really aware that the media demonizes Obama.

Originally Posted by Wasp

...lame reimbursements by Medicaid and Medicare creating cost shifting to private payers, government mandates of unlimited heroic care and other unneeded benefits)?

I heard this cost shifting argument last week for the first time at a presentation by a BC economist. What's wrong with thinking this will happen?

• A subset of doctors refuse to take Medicare and Medicaid patients resulting in an above market (due to cost shifting) reimbursement rate.
• In an effort to gain market share a subset of that subset accepts a lower reimbursement.
• The lower reimbursement is now the market reimbursement and that's what other doctors have to take (including those with Medicare and Medicaid patients.)
• There's no more cost shifting.

[cincinnatikid]

Originally Posted by Wasp

Which raises the other point, why does the media always demonize the insurance companies (like Obama) instead of looking at the drivers of the cost increase (doctors and hospitals increased rates - sometimes justified due to malpractice cost and lame reimbursements by Medicaid and Medicare creating cost shifting to private payers, government mandates of unlimited heroic care and other unneeded benefits)?

Agree to an extent, but an average increase in the 30-35% range is a lot more than cost trend (low to mid teens at most?). On the surface, it would appear that either someone screwed up on the pricing and it is well within a DOI's function to make sure that predatory pricing and other such anti-competitive behaviors aren't occurring. A lot of the HCR stuff has been grandstanding and villifying insurers, but I don't have a hard time with looking into this particular case.

[cincinnatikid]

Originally Posted by Wasp

You are a little too slow.

Story of my life.

[Dr T Non-Fan]

Originally Posted by DanielSong39

The solution is to not buy Blue Shield insurance...

Or, since they often underprice their products (otherwise they wouldn't ned such a large increase), do buy Blue Shield.

[Dr T Non-Fan]

Originally Posted by Wasp

Which raises the other point, why does the media always demonize the insurance companies (like Obama) instead of looking at the drivers of the cost increase (doctors and hospitals increased rates - sometimes justified due to malpractice cost and lame reimbursements by Medicaid and Medicare creating cost shifting to private payers, government mandates of unlimited heroic care and other unneeded benefits)?

You mean, why do the media do the easy thing instead of the harder thing?
Or, why does the administration choose to blame someone other than the government -- i.e., itself?