Amid all the criticism from Washington and Kathleen Sebelius, Blue Cross of California has opted to hold off on their monster rate increase. The 40% rate increase which Blue Cross has been defending for several days now with some pretty valid points has turned into a PR nightmare for the California’s largest for profit health insurance company.
The state insurance commissioner requested the delay on Monday after the states 700,000 individual health insurance policy holders began receiving these shocking increase notices for increases to start on March 1st.
California’s insurance commissioner is only armed with one method of denying the increase which is based on the state regulation that requires all insurers to spend a minimum of 70% of the health insurance premiums on health claims instead of using the profits for private jets and so forth.
Short of that, however the state is pretty much without any teeth. In other words unless this can be proven the state must allow the increase. If however they are violating this rue, they could lose their license to sell health insurance policies in California until they reduced their premiums.
As I showed in another article on the Blue Cross of California rate hike, Blue Cross is actually right now the most affordable health insurance company in California and because of their position they should enjoy an economy of scale in California which should allow them to dominate other companies in terms of premiums.
This issue has garnered national attention of the worst kind and the Obama administration has been like a rabid dog biting on Blue Cross legs.
“While a two-month delay offers some temporary relief,” said Kathleen Sebelius, the secretary of health and human services, “what California families need is long-term health insurance security. This rate increase underscores the urgency of passing real health insurance reform.”
The insurance commissioner of California, Mr. Steven Poizner might be a little familiar to California residents as he is currently running for governor of California, and will certainly be using this issue to make a name for himself by beating on “the defenseless company.”
“There are reasons to be suspicious that this rate increase might not be in compliance, I have a healthy skepticism about how you get to 39 percent.” His skepticism is grounded in the fact that the increases are 3 times the rate of medical cost inflation, which is simply astounding considering how high and fast medical costs are inflating.
Anthem which is owned by Wellpoint one of the larger insurance companies in the country is pretty convinced the rates are justified but are taking a huge chance on the fact that their numbers are correct. They are in a untenable position and though they are putting on a brave face with statements like these, “we welcome the regulatory review and are confident that our rates reflect anticipated medical costs,” I am pretty sure that their are not in a financial position that justifies such a ridiculous increase.
Basically, we have a quite volatile situation here, when you consider the publicity hungry insurance commissioner going after the rich health insurance company, and it should make for some good reading in the coming days.
The company has said the rates are justified because of escalating medical and pharmaceutical costs and because the recession is prompting healthy consumers to drop their coverage, leaving insurers with a smaller, sicker risk pool. Mr. Sassi said this week that Anthem lost money on the individual market in California last year. Mr. Poizner said he could not confirm that.
Mr. Sassi said the average rate increase would be 25 percent, and that fewer than one in four customers would see increases of 35 percent to 39 percent.
Mr. Poizner said he also was seeing “pretty significant” price increases on individual policies sold by other carriers, but he could not compare them to Anthem’s.
