California Insurance Commissioner Dave Jones (D) has denied a proposal by Blue Shield of California that would have closed several of its policies to new customers, the Los Angeles Times reports.
Jones said the proposal violates state rules that seek to protect policyholders from large rate increases.
Blue Shield had proposed closing off new enrollment for 22 health plans that cover about 152,000 policyholders.
In addition, the insurer planned to begin selling several new policies regulated by the California Department of Managed Health Care (Terhune, Los Angeles Times, 7/4).
In March, the Department of Insurance disputed the proposal to stop enrollment for the policies and requested more information (Robertson, Sacramento Business Journal, 7/3).
According to the Times, regulators often scrutinize insurers' efforts to stop enrollment on certain policies because existing policyholders will grow older and likely use more health care services. This could prompt significant rate increases because healthier policyholders would not be joining the plans and offsetting the costs.
Jones said consumers "should not have to worry that their health insurer will make decisions to open new products and close others in ways that put the policyholder at risk of being pooled with unhealthy lives whose claims costs are likely to cause premiums to increase" (Los Angeles Times, 7/4).
Last month, advocacy group Consumer Watchdog filed a lawsuit against Blue Shield for allegedly violating a 1993 state law by regularly ending policies and then raising rates for members left in the plan.
The state law requires health plans that want to stop offering a policy to "pool" members in that policy with other members to minimize rate increases for enrollees in the old policy. The law also requires health insurers to offer members the option to switch to a comparable policy (California Healthline, 6/13).
Blue Shield's Response to Denial
Steve Shivinsky -- Blue Shield spokesperson -- said, "There will be no 'death spiral' in rates, and there was no 'death spiral' in rates the last time we stopped selling plans to new people."
He said that Blue Shield will work with the insurance department to develop a "pooling plan" that state officials "find acceptable" (Los Angeles Times, 7/4).