The state insurance commissioner denied Blue Shield of California's hope of closing most of its individual block of business, which would affect almost 250,000 members.
After reviewing Blue Shield's proposal, California Insurance Commissioner Dave Jones concluded the closure would violate state law because there aren't enough members remaining in the insurer's individual policies to adequately spread costs to avoid rising premiums, reported the Sacramento Business Journal.
Jones also said Blue Shield's plan to place members with closed policies into a much smaller actuarial pool wasn't fair to those being reassigned.
"When consumers purchase health insurance, they should not have to worry that their health insurer will make decisions to open new products and close others in ways that put the policyholders at risk of being pooled with unhealthy lives whose claims costs are likely to cause premiums to increase," Jones said in a statement.
Jones's concerns follow a lawsuit that Consumer Watchdog filed last month against Blue Shield for alleged 'death spiral' policies. The consumer group claimed Blue Shield was pushing older and sicker members into low-benefit, high-deductible plans.
Blue Shield, however, denied the death spiral accusations. "Nobody is being forced to change plans," Blue Shield spokesman Steve Shivinsky told the Los Angeles Times. "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."
The insurer also emphasized that it's not forcing members to change plans; it's simply not selling the old individual policies to new members, the Sacramento Business Journal noted.