Blue Shield is making the case for tough premium regulation, because is has proven that it has the power to raise rates as much as it wants at will and refuse even a modest request from the elected insurance commissioner.
After spending the day walking the halls at the state Capitol in Sacramento yesterday, I can tell you Blue Shield made a big mistake when it decided to price gouge its customers. The state legislature is ready for a fight to give the insurance commissioner power to approve or to deny health insurance premium increases before they take effect. If that fight fails, Consumer Watchdog will help the voters decide through a ballot measure whether government should have the power to regulate and roll back excessive premiums.
Blue Shield made an offer in an errant press release it later recalled which no regulator or policyholder can accept. The company said it would let an independent actuary decide rate justification, and decided to live by the policy when news broke. The problem is that in the absence of legislated standards for what is an excessive premium, an independent actuary has no basis for review of the premium's reasonableness other than whether there is an error in addition, multiplication or subtraction.
Questions abound about how Blue Shield can justify its 59% premium hike other than by the means it seeks -- an actuary to say all the math is good. The standard Californians deserve is that the rates are not excessive or discriminatory. That's the standard for the prior approval of auto and homeowner insurance rates in California that are rejected or accepted by our elected insurance commissioner. The standard saved drivers $62 billion on their auto insurance according to the Consumer Federation of America.
Blue Shield is more opaque than any health insurance company in California because of its unique tax status. We don't know how much the CEO makes, nor can we adequately see the company's the books since it is neither publicly traded nor a tax exempt charity that must make its tax returns public. Suspicion is Blue Shield cooked its books, and hid big sums of money, to justify the 59% increase.
Only subpoenas and special investigative hearings will determine the truth in the absence of new authority given to the elected insurance commissioner Dave Jones. Legislation by Assembly Member Feuer will give the commissioner that power and it is precisely what Blue Shield's second PR problem in two weeks sought to derail. Once again, Blue Shield has made the case for exactly the tough regulation it seeks to stop.