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Blue Shield of California cancels rate increase as individual market policyholders assume more risk

March 17th, 2011

Less than one week after Blue Shield of California said it would raise rates on individual market products May 1 because premium revenues were not keeping up with losses due to rising medical costs and increased utilization of high cost procedures, the insurer has cancelled the increase.

Losses are now ameliorating, Blue Shield spokesman Tom Epstein told the Los Angeles Times, coming in below projections for the latter part of 2010.  While the insurer isn’t fully certain of the reason, it believes consumers are assuming more risk by purchasing higher deductible policies with fewer benefits in order to keep rising premiums affordable.

“It’s definitely happening,” Epstein told The Times. “As rates go up, people do tend to downgrade into less rich products that have more cost sharing.”

In canceling the planned May 1 rate increase that was to average 6.5 percent and boost premiums by as much as 18 percent for some policyholders, Blue Shield said March 16 that it still expects to lose money in 2011 after $27 million losses on individual policies last year.

 


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