Blue Shield of California Withdraws Individual Market Rate Increase

Action reflects company's longstanding commitment to affordable care and health reform

Name: Johnny Wong

Title: Corporate Communications

Phone: 415-229-6321

Email: johnny.wong@blueshieldca.com

SAN FRANCISCO, CA --- Blue Shield of California (BSC) has withdrawn its rate filing with the California Department of Insurance and the company will not increase rates to any individual or family plan member for the remainder of the year, announced BSC chairman and CEO Bruce Bodaken today. The not-for-profit health plan has 340,000 individual and family plan members in California.

"Our not-for-profit mission is to provide Californians with access to quality health care at an affordable price," said Bodaken. "As long-time advocates for universal healthcare coverage, we are also deeply committed to the success of health reform. The best way to fulfill our mission and make reform work is to keep costs down. By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times. It's a financial risk for us, but a risk that's worth taking."

"We have long acknowledged that the individual health insurance market is broken and we are pleased that the rules will change in 2014," added Bodaken. "But health reform will succeed only if we restrain the rising cost and utilization of medical services that is driving premium increases. We are dedicated to working collaboratively with providers and regulators to address that issue."

"A consistent, predictable and fair regulatory environment is another key component of a thriving competitive market that will drive affordability," continued Bodaken. "Constantly changing what information is requested and imposing long delays confuses consumers and threatens the long-term viability of the market. The rules should be clear and regulators should act promptly on rate filings to enable individual insurance purchasers to know what they will pay for coverage and when they will pay it."

Blue Shield lost $27 million on individual health insurance coverage in 2010 and even with the now withdrawn rate increase, the company expected additional losses on this business in 2011. As a result of today's decision, Blue Shield individual policyholders will save $35-40 million this year.

In October 2010, the company filed for new individual market rates with the Department of Insurance, to be effective in March 2011. In January, Insurance Commissioner Dave Jones asked Blue Shield to delay the filing for 60 days and the company complied. At the same time, Blue Shield submitted the rates to an independent actuarial review by David Axene, who had completed rate reviews for the Department of Insurance in 2010 and discovered errors in several filings. Blue Shield also promised to pay refunds to its members if Axene's review found that the rates were too high. On March 1, Axene released his report, which concluded that the rates were appropriate. With today's action, however, that filing is withdrawn and the new rates will not take effect.

Under rates that are already in effect, some Blue Shield members will see their premiums change in 2011 if they move to a new region, add or subtract family members from their policy, or enter a new age band. Blue Shield changes rates based on age every five years, at the time of the member's birthday.

Blue Shield's commitment to reform

In 2002, Blue Shield proposed a plan for universal healthcare coverage that included major reforms of the individual insurance market, including the elimination of medical underwriting and subsidies for individuals who needed help paying their premiums. The company has advocated for health reform ever since and supported the Affordable Care Act, which resembles Blue Shield's original proposal.

Blue Shield has been a leader on other reforms encouraged by the federal law that reduce costs for its members, particularly the development of Accountable Care Organizations (ACOs). In January 2010, the company launched an ACO with Catholic Healthcare West and Hill Physicians for CalPERS members in the Sacramento area. The three parties agreed share the risk to guarantee a zero rate increase for the 42,000 CalPERS members served by the ACO when other CalPERS members were receiving a 9 percent increase. By coordinating care more effectively and reducing unnecessary hospitalizations, the three parties were successful in meeting the target while maintaining high quality and member satisfaction

Buoyed by the success of the Sacramento ACO, Blue Shield recently announced the launch of two similar projects in San Francisco with five participating providers that guarantee a zero rate increase for 26,000 employees and retirees of the City and County of San Francisco.

"We will continue to innovate to improve care and reduce costs for our members," said Bodaken. "We recognize that health coverage is becoming unaffordable for many Californians and we are dedicated to reforms that help our members receive better value for their premium dollars."


Background on Blue Shield of California

Blue Shield of California, an independent member of the Blue Cross Blue Shield Association, is a not-for-profit health plan with 3.3 million members, 4,800 employees, and one of the largest provider networks in California. Founded in 1939 and headquartered in San Francisco, Blue Shield of California offers a wide range of commercial and government products throughout the state. The company has contributed more than $125 million over the past four years to the Blue Shield of California Foundation --which was named one of BusinessWeek's top 20 most generous corporate foundations. Contact your local agent or broker for more information about Blue Shield products and services, or visit the Blue Shield web site at www.blueshieldca.com.