Does Blue Shield's rate hike retraction open the flood gates?

When you blink among a forest of eyes, does anyone actually see it?

That question comes to mind with Blue Shield of California's recent decision to cancel a planned May 1 rate increase for its 193,000 individual policyholders and forgo any further rate increases for 2011.

Blue Shield had maintained for months that such a bump was warranted by increasing medical costs. But it was the third planned increase in seven months. While the average overall increase was 30 percent, hundreds of policyholders were bumped up 80 percent or more.

Blue Shield, which has long flown under the media radar, suddenly found itself at the center of critical articles and protests at its headquarters. Although Blue Shield has proven the increase was actuarially justified, it apparently could not live with the pressure.

"As long-time advocates for universal healthcare coverage, we are also deeply committed to the success of health reform," said Blue Shield CEO Bruce Bodaken. "The best way to fulfill our mission and make reform work is to keep costs down. By agreeing not to raise rates this year, we are helping to make coverage more affordable for our members during tough economic times. It's a financial risk for us, but a risk that's worth taking."

Whether this attitudinal change among insurers takes hold remains to be seen. Anthem Blue Cross of California, which had a 16.4 percent average rate hike scheduled to take effect June 1, cut it down to 9.1 percent and pushed it back until July.

For Anthem, that's a major concession. It's also good news for hospitals and other providers. Many policyholders had been moving into coverage with lower premiums to mitigate the rate hikes, but they always had higher deductibles and co-pays, sometimes $5,000 a year or more. The result: more collections work, and often writeoffs or charity care for those larger balances. The insurers may have been ofsetting higher medical costs, but those who were actually furnishing the care didn't necessarily benefit.

Meanwhile, Aetna and PacifiCare have similar rate hikes scheduled between now and June, and their initial rhetoric suggests they won't back off. Unlike Blue Shield, the plans are for-profits, and cannot placate their shareholders so easily.

Anthony Wright, executive director of Health Access California, said he hopes Blue Shield's actions will be emulated by all of the insurers, noting that they should "reassess what rates are justified and reasonable in these tough economic times." Economics may ultimately play a minor role in what path the payers take.

Assuming, though, that the exchanges open as envisioned in 2014, such plans will not only have to complete with one another, but the public's perception of them. Blue Shield's shift may serve as a pre-emptive marketing move. The ill will Wellpoint generated with its policyholder rescissions--which helped spur health reform's passage a year ago--won't be easily forgotten.

That begs another ultimate question: when you can't see the forest for the trees, will anyone care to hear you falling? - Ron