California Can't Block Staggering Health Insurance Rate Hikes

HHS Secy. tells customers to ask governors for change

ByABC News
January 6, 2011, 11:29 AM

Jan. 6, 2011— -- Tens of thousands health insurance policyholders in California begin the new year bracing for rate hikes of up to 59 percent in the coming months -- and they are not the only insurance company hiking rates. Wendy Lemlin recently found out her rates are going up too.

"I will probably drop my health insurance and pray that I continue to be as healthy as I've been," she said today.

Watch ABC's "World News with Diane Sawyer" for more on this story.

Under the new health care reform law, the federal government is able to shine a spotlight on rate increases, but it can't reject them. To customers like Lemlin who want someone to confront the insurance companies, Secretary of Health and Homeland Security Kathleen Sebelius said "that's really what the state authority would do."

In California, the state insurance commissioner does not have full regulatory authority over rate increases. Sebelius recommended customers contact their state legislators directly to urge them to fix it.

"They should contact the governor of their state, and the state legislature demanding those laws be changed," she told ABC News.

Californians like Michael Frasier, who runs a sporting goods company, say they feel helpless. "I feel like there's nothing I can do about this since it's out of my hands, and there's no law to prevent this right now in California."

He first thought the letter from Blue Shield telling him of his 59 percent rate increase "was a joke."

But now, reality is setting in -- beginning March 1 his monthly payment will increase from $271 to $431. "I'm not sure what I'm going to do. I'm considering dropping my health care insurance completely. It's kind of scary at 53."

Blue Shield in San Francisco said 193,000 policyholders will see increases averaging 30 to 35 percent after three separate rate hikes since October.

In a statement issued today, Blue Shield said the new rates "reflect trends that were building long before health reform" and "our individual market medical costs are rising." Blue Shield of California said it expects to lose tens of millions of dollars on its individual healthcare business in 2010 and 2011.