On Friday, California's Insurance Commissioner Dave Jones pressed for a complete department review of Blue Shield of California's rate hike on individual policies, and stressed the need for legislation that would give him authority to reject premium increases.

The commissioner says he's disappointed the insurer wouldn't agree to his request that it delay the March 1 implementation of the rate increases.

"I made that request in light of the fact that I had been sworn in only for 72 hours and wanted to make sure that I have the time needed to review their rate filing for compliance with a new state law (SB 1163) that went into effect January 1, 2011," Jones said in a press statement.

Blue Shield announced in a statement on Jan. 14 that its life and health insurance members recently received notices of rate increases that averaged 15 percent annually. Due to "a variety of factors, some members received increases much higher than the average."

"We regret that our members have received significant rate increases in recent months and want to be absolutely certain that the rates reflect our actual cost of providing medical care," said Blue Shield Chairman and CEO Bruce Bodaken. "To establish trust and confidence in our rate-setting process, we have taken the unprecedented step of agreeing to be bound by the conclusions of an independent third party. If this independent review finds that the rates are not sound, we will hold our members harmless by refunding the difference with interest."

Still, Commissioner Jones says these rate increases are not sustainable. "Blue Shield's rate hike of up to 59% hits its approximately 200,000 policyholders very hard. It comes at a time when many Californians continue to struggle."

In an interview with the Wall Street Journal, Jones said California's history of rate hikes in excess of 10 percent is "just business as usual." The state has become a national focal point for high rate jumps, with employer-based health insurance skyrocketing roughly 40 percent over the last six years, according to the Los Angeles Times.

Furthermore, California is "bellwether for this issue in part because so many people in the state take out individual policies," writes Avery Johnson for WSJ. "Some two million Californians bought individual policies in 2009, more than double the number in Texas, the state with the second-largest individual market, according to the Kaiser Family Foundation. The state's mix of businesses skews toward restaurants, hotels, entertainment and agriculture--industries where employers tend not to offer coverage, said state health experts."

California's insurance commissioner can't reject rate increases, only review them for compliance with state law. "SB 1163 requires the Insurance Commissioner to review the reasonableness of health insurance rate increases," Jones said.

"Blue Shield is required by SB 1163 to obtain an independent actuarial certification of the reasonableness of their rate filing. Their announcement today that they are hiring an actuary is something that is already required by law. We will request full disclosure of all information necessary to determine the reasonableness of the rate increase under SB 1163. We expect full compliance with SB 1163.

"The Blue Shield rate increase underscores the need for the Legislature to give the Insurance Commissioner the authority to reject excessive premium increases. I do not have that authority now. I have been fighting to get that authority. As a State Assembly member I authored bills to give the Insurance Commissioner the authority to reject excessive premium increases. I look forward to working with Assemblymember Feuer who has re-introduced this legislation."

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Calif. insurance commissioner slams Blue Shield rate hike

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