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Blue Shield Policy Closures Blocked in CA

 |  By Margaret@example.com  
   July 11, 2012

The California Department of Insurance and Blue Shield of California are at odds over the insurer's efforts to close 23 health plans and transfer those members to other products. Blue Shield contends that it is following the law, while the CDI has ruled that it has "disapproved" the block of business closures. That means Blue Shield can't proceed "with the block closures period," a CDI spokesperson told HealthLeaders Media in an e-mail exchange.

 

The potential block closures affect an estimated 250,000 members. At issue, according to a CDI press release is Blue Shield's "notice of intention to close most of its individual market block of business regulated by the CDI on July 2, 2012."

CDI initially disapproved the block closure in March but requested additional information from Blue Shield. The March disapproval was sustained because "the pooling plan submitted to the department does not comply with the requirements" of the state insurance code. The CDI contends that the "size of the remaining open block is inadequate for pooling based on consideration of the accumulative recent and expected future experience of the closed forms and the open block."

In addition, CDI states that inadequate provision was made by Blue Shield for the "more than 20,000 consumers in the Vital Shield 2900 Plan, as they have no transfer right without underwriting."

Blue Shield doesn't see things that way, however. "Blue Shield is complying with all applicable laws. The law describes exactly what we have to do if we stop selling plans to new people, and we are doing it," Steve Shivinsky, a Blue Shield spokesperson, said in an e-mail response to questions from HealthLeaders Media.

"Everyone can stay in the plans they're in, if they want. No one is being forced to change plans." The insurer contends that since it is permitting members to "move into open blocks providing comparable benefits with no additional underwriting, there is no statutory pooling requirement."

The Blue Shield e-mail states that although the CDI can provide an opinion "as to whether the pooling plan complies with the block closure statute. That statute does not state that disapproval of a pooling plan prohibits Blue Shield from proceeding with its block closure."

Shivinsky says Blue Shield's pooling plan is sound, but that the insurer is working with the CDI "to see whether we can alleviate the department's concerns and agree on a mutually acceptable pooling plan."

It may take some time to establish a common ground. Among the CDI concerns is that without new members, a policy block will become more and more expensive for those who remain, a so-called "death spiral" of mounting costs."

No so, counters Shivinsky. "Not selling certain plans to new people won't have a dramatic increase on rates for the people who stay in their plans. There was no major impact on rates the last time we stopped selling plans to new people in 2010."

 

An unrelated lawsuit filed by Consumer Watchdog, an advocacy group, in June in San Francisco County Superior Court contends that Blue Shield "manipulates the closure of blocks of health insurance business with the apparent intention of illegally decreasing policy benefits to enrollees while escalating the premiums they must pay."

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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