After Blue Shield shocked the nation with 59% premium hikes in California last week, the company just refused a request from the elected insurance commissioner to stop the increases for 60 days. 

After Blue Shield shocked the nation with 59% premium hikes in California last week, the company just refused a request from the elected insurance commissioner to stop the increases for 60 days.

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. (You can help give them the push they need by sending an email to your state representatives today.) 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.

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Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

$2.655 Million To Date To Sacramento Political Committee That Doesn’t Disclose Industry Funding In Ads Supporting Villines, Attacking Jones.

Insurance companies’ addition of $1.365 million this weekend to their campaign to elect Mike Villines as CA insurance commissioner is consistent with Consumer Watchdog’s expectation that the industry will spend at least $5 million before election day.  

The following insurance industry contributions, totaling $2.655 million, have been given to a Sacramento political committee called "JobsPAC," since late September: 

• George Joseph, Chairman of Mercury Insurance – $775,000
• Allstate Insurance – $700,000
• Liberty Mutual – $490,000
• Progressive Insurance – $390,000
• Anthem Blue Cross – $100,000
• Health Net – $100,000
• Farmers Insurance- $100,000

To date, JobsPAC has spent approximately $845,000 on ads attacking candidate Dave Jones and $566,000 on ads supporting Mike Villines.  Consumer advocates expect that JobsPAC will report another one million dollar expenditure on the race in the next few days and another two to three million dollars in insurance industry contributions and campaign expenditures before election day.

Because the industry money is first going to JobsPAC, the fact that it came from insurance companies will not be disclosed to voters who see or hear the ads.  A copy of the television advertisement being aired can be viewed here.  The advertisement’s disclosure, which makes no mention of insurance company funding, reads: "PAID FOR BY JOBSPAC, A BI-PARTISAN COALITION OF CALIFORNIA EMPLOYERS.  NOT AUTHORIZED BY A CANDIDATE OR CANDIDATE-CONTROLLED COMMITTEE."

This insurance industry campaign to choose the next insurance commissioner is becoming an electoral deception of epic proportions.  Most of the information Californians will get about the candidates for insurance commissioner will be delivered in advertisements entirely paid for by the insurance industry and voters won’t even know it.

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Posted by Doug Heller, Executive Director of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Californians, including those stricken by autism, and their parents and caregivers, expect regulators to enforce the law, not to side with insurance companies seeking to boost their profits by denying patients the care they need.

Governor Schwarzenegger, however, a longtime and vocal supporter of the Special Olympics and developmentally disabled children, is allowing health insurers to evade state mental health laws and shift health care costs to already beleaguered taxpayers. Last Friday, Governor Schwarzenegger vetoed SB 1283 by Senate President pro Tem Darrell Steinberg (D-Sacramento).  The bill would have improved, but not fixed, a broken regulatory system.

Californians, including those stricken by autism, and their parents and caregivers, expect regulators to enforce the law, not to side with insurance companies seeking to boost their profits by denying patients the care they need.

Governor Schwarzenegger, however, a longtime and vocal supporter of the Special Olympics and developmentally disabled children, is allowing health insurers to evade state mental health laws and shift health care costs to already beleaguered taxpayers. Last Friday, Governor Schwarzenegger vetoed SB 1283 by Senate President pro Tem Darrell Steinberg (D-Sacramento).  The bill would have improved, but not fixed, a broken regulatory system.

SB 1283 would have set time limits on regulators at the California Department of Managed Health Care (“DMHC”) when reviewing insurance company denials of treatments for autism.  The bill is needed because regulators had been delaying such reviews for months in some cases, leaving autistic children without the care they need.

Schwarzenegger’s veto of SB 1283 is just the latest blow.  Last July, Consumer Watchdog sued the DMHC, the Schwarzenegger Administration agency responsible for regulating many of California’s health insurers. The suit alleges that the DMHC has wrongfully allowed insurance companies to refuse to pay for autism treatments, resulting in the denial of Applied Behavioral Analysis (“ABA”), an essential treatment for autism, in plain violation of the California Mental Health Parity Act.  That law requires health insurers to cover and pay for all medically necessary treatments for autism, including ABA.

Until March of last year, health care consumers were able to appeal an insurer¿s denial of ABA through the DMHC’s Independent Medical Review (“IMR”) system, in which a treatment denial is reviewed by a team of doctors that is unaffiliated with the insurance company that denied the treatment and independent of the DMHC.

However, as the IMR doctors increasingly overturned insurer ABA denials, compelling the insurers to pay for ABA, insurers privately urged the Schwarzenneger Administration to change its procedures and process the treatment denials through the DMHC’s own internal grievance review system.  Last March, the DMHC issued a memo indicating that the agency would review ABA and other autism treatment denials through the DMHC’s internal grievance system as urged by insurers.  In a key interim decision, a Superior Court judge ruled that memo to be an illegal “underground regulation” because it violated state law requiring a public process for changing insurance regulations.

Unlike the IMR system, in which independent doctors evaluate whether a treatment should be provided on the basis of whether it is medically necessary and effective, the grievance system is conducted by DMHC staff, who are not doctors and who simply defer to the insurers’ determination of whether the claim is even covered by their health care policies.  

Why would the Schwarzenegger Administration make the change the insurer’s wanted? 1,324,850 reasons–that’s the amount of money the governor has received from health insurers in the form of campaign contributions.

SB 1283 would have helped families improperly side-tracked into the DMHC grievance system by reining in outrageous delays by regulators.  But only Consumer Watchdog’s lawsuit will ensure that independent doctors, not politically-motivated regulators, get to decide whether or not kids get the treatments that their doctors say they need.  We go to trial in December.  Stay tuned.

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Posted by Jerry Flanagan, Health Care Policy Director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Obama’s mad about insurers blaming his health care plan for big rate hikes, but he doesn’t have to take it anymore. He can and should issue an executive order to stop the rate hikes immediately.Obama’s mad about insurers blaming his health care plan for big rate hikes, but he doesn’t have to take it anymore. He can and should issue an executive order to stop the rate hikes immediately.

Obama’s mad about insurers blaming his health care plan for big rate hikes, but he doesn’t have to take it anymore. He can and should issue an executive order to stop the rate hikes immediately.Obama’s mad about insurers blaming his health care plan for big rate hikes, but he doesn’t have to take it anymore. He can and should issue an executive order to stop the rate hikes immediately.

A Blue Cross policyholder emailed me last night about her recent 20 percent rate hike. She’s now being pushed into a policy that costs much more and comes with a $7500 deductible. Her insurer’s response: blame the president and his “10,000 page legislation.”

That’s electioneering in my book. The President needs to fire back and protect customers as well as the integrity of his patient protection act. This is the type of out-of-the-box thinking that Americans expect from their President–and he has yet to deliver.

Today, Consumer Watchdog wrote the President asking that he freeze health insurance premiums to protect consumers from unjustified and unreasonable increases until new rules requiring public justification of unreasonable premium hikes take effect later this year.

The Supreme Court has held that a President may issue an Executive Order where the President has been expressly or implicitly authorized to act by the Constitution or Congress. Under the federal health reform law, Congress expressly provided that, beginning with the 2010 plan year, health insurance companies cannot raise insurance premiums until insurers “submit to the Secretary and the relevant State a justification for an unreasonable premium increase prior to the implementation of the increase.”

Here’s the reasoning behind the executive order: HHS is working to finalize regulations by the end of 2010 defining an “unreasonable premium increase.” It’s not yet possible for regulators to determine which premium increases require a justification from insurers. So an Executive Order freezing premium increases until insurers have justified increases deemed unreasonable is necessary to implement the express requirements of the federal law.  

There is precedent for the success of such a freeze. In California in 1988, Proposition 103 enacted the nation’s strongest prior approval system for property and casualty rate regulation. California’s insurance commissioner ordered a freeze on all rates until implementing regulations were enacted, and insurers complied. Despite claims that the freeze and new regulation would drive insurers out of the state, or out of business, the state’s auto insurance market is the 4th most competitive in the nation and stayed profitable, while auto insurance premiums rose at the slowest rate in the nation, according to a 2008 analysis by the Consumer Federation of America.

An Executive Order establishing the premium freeze could be written so that it ends when those regulations become effective, thus allowing premium increases to go into effect only after unreasonable increases are justified by insurers as intended by Congress.

Will Obama get tough on insurers? He has the power, now he just needs the presidential will.

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Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

The insurance industry is going directly to the White House in its latest attempt to evade a key portion of the health reform law that would force them to operate more efficiently. But instead of making the argument directly, the industry is speaking through state insurance commissioners that are either friendly to insurance companies or cowed by insurers’ threats to leave a state market.

The insurance industry is going directly to the White House in its latest attempt to evade a key portion of the health reform law that would force them to operate more efficiently. But instead of making the argument directly, the industry is speaking through state insurance commissioners that are either friendly to insurance companies or cowed by insurers’ threats to leave a state market.

The insurance commissioners of Maine and Iowa were at the White House meeting Wednesday and said they might lose all but one company in the individual insurance market if they were held to the 80% rule, which would require insurers to spend at least 80% of revenue on medical care. They’re cowed by brute market power. The odd man out was Kevin McCarty, the Florida Insurance Commissioner. Florida is a huge market, with several major companies, and no particular reason to fear wholesale departures from its market. But he was a chief voice calling for a "phase-in" that would let insurers off the hook.

The National Association of Insurance Commissioners hasn’t endorsed any blanket exemption from the 80% rule. But there’s a fight still brewing at the NAIC about the hefty payments that insurance brokers get for selling individual health insurance, and a compromise reached at the NAIC’s summer meeting in August left the door ajar for a deal that could let the broker fees be deducted from premiums.

If those payments (up to 20% of the first-year premium upfront and 5% a year after that) were included in the formula for the "medical care ratio," it would make a joke of the 80% requirement. If they’re not included, insurance companies will have to actually be more efficient and broker payments might get smaller. The insurance brokers, however, are quietly backed by the big insurance companies, who need them to draw in business and later to "guide" customers through insanely complicated policies so they don’t go directly to the company.

Now, with the Florida insurance commissioner in the lead, they’re trying to get the White House and the Department of Health and Human Services to do the dirty work. 

It’s not a big deal publicly, like the major insurance companies’ announcement that they will no longer sell individual policies for children because they can no longer exclude children with health problems. The medical care ratio, also known a the "medical loss ratio" is harder to grasp and not part of the public conversation. It’s really a Wall Street metric–the lower the medical loss ratio, the more investors like the stock.

CQ.com (subscription barrier), said 32 state commissioners were at the lightly reported White House meeting. There was no mention of dissenting voices, so it looks like the members of the NAIC are enabling insurers to keep whacking consumers with 20% premium increases and increasingly worthless policies, at least until 2014. The insurers have powerful lobbies in every state Legislature, and the commissioners themselves partake of a revolving door to better-paying jobs in the industry.

From the CW story:

Iowa Insurance Commissioner Susan E. Voss said she sent a waiver

letter to the Department of Health and Human Services (HHS) on Tuesday

asking that the MLR be phased in through 2014 in her state, where there

is a dominant health insurer and a small cluster of other providers in

the individual market. Without more time for small companies to meet

the standard, “it’s going to be like 1-800-Blue Cross Blue Shield in

Iowa,” Voss said.

Florida Insurance Commissioner Kevin McCarty said he appreciated the

president’s words because “we can’t put this all into place

immediately” without potentially disrupting the market. “If our goal is

to minimize disruption before guaranteed issue in 2014, then a way to

do that is to do some kind of phase-in,” he said, referring to the

point in 2014 when health insurers cannot deny applicants if they have

pre-existing conditions.

Administration officials “don’t like the word phase-in” and want

concrete evidence of what disruption in the marketplace would be,

McCarty said. He said he had a conversation with Jay Angoff, head of

the Office of Consumer Information and Insurance Oversight, about

Florida’s concerns.

The hourlong White House meeting included commissioners from 32

states, two territories and the District of Columbia. HHS Secretary

Kathleen Sebelius and Labor Secretary Hilda L. Solis were in attendance, and the president arrived about halfway through, commissioners said.

Frankly, it sounds like the White House will cave if the Florida commissioner puts together any kind of numbers proving possible "market disruption," dubious or not. I hope I’m wrong.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.