New Blue Shield Rates Trigger Obamacare Showdown

In what could trigger the first public confrontation between the Department of Health and Human Services and a major health insurer, Blue Shield of California has taken the brazen step of announcing a series of rate increases that will amount to a nearly 60% increase for individuals. Citing increasing health care costs and the mounting financial pressure of implementing Obamacare, Blue Shield is proposing a three-tiered increase to take effect over the next five months that will impact nearly 200,000 policyholders.

The recent smack down of Anthem Blue Cross by state and federal officials over its plans to raise its rates by 40% didn’t seem to deter Blue Shield which says that the increases are necessary and within the bounds of regulatory guidelines.  The email inbox and phone lines of the state’s Insurance Commissioner, Dave Jones, are melting down by a lava flow of consumer complaints. However, the state claims that its hands are tied.

First Test of Obamacare’s Regulatory Mettle

Anthem backed down on its huge rate increase only because of the public pressure that mounted following President Obama’s high profile lambasting of the company. Anthem still imposed an increase of 20% and is planning on additional increases over the next year.  No one expects Blue Shield to buckle under public pressure, however, HHS, through its Secretary Kathleen Sebelius, has already issued a warning that the rate increase will be challenged under her newly issued edict of that increases deemed to be unreasonable will receive close federal scrutiny.

Although HHS hasn’t clearly defined “unreasonable,” the threshold that would trigger its attention is a rate increase in excess of 10% and where the insurer has not presented sufficient justification for the increase.  This trigger is fairly broad and so are the powers that HHS is exercising in exerting its oversight over the state’s domain of insurance regulation.

The move by Blue Shield, which is expected to be followed by other insurers, will be the first big test of the brawn of HHS and the regulatory muscle that Obamacare wants to flex in its control over health insurance companies.  The new health care law was just weeks old when a number of major insurers announced their plans to raise their rates due in part to the anticipated cost pressures of the new law.  The announcement came as somewhat of an embarrassment to the Obama administration which was in the midst of another campaign to “sell” the new law and its cost-cutting benefits to the public.

Only Losers are Health Policyholders

The coming showdown between Blue Shield and HHS will be a test of wills that will not play out very pretty in the public eye. There is not likely to be a clear winner, especially on the public relations front, but there will most definitely be losers which will be the policyholders who will suffer through rate hikes regardless of the outcome.

photo credit: mangpages

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