D.C. Rescinds 35% Rate Hike for CareFirst BlueCross BlueShield

The insurance regulator for the District of Columbia has rescinded a 35% premium rate increase it approved for CareFirst BlueCross BlueShield's comprehensive major medical policies for 2010 after a single member complained about the rate hike.

The D.C. Department of Insurance, Securities and Banking said it initially approved the filing for the individual, non-Medigap indemnity health insurance policies last October, in which the higher premiums took effect on Jan. 1, 2010.

But based on the subscriber's complaint, the department asked for more information from CareFirst's Group Hospitalization and Medical Services Inc. and realized it didn't meet certain requirements that justified the rate hike, the regulator said.

Maryland-based CareFirst Inc. serves about 3.4 million people in the Mid-Atlantic region and operates the Blue Cross Blue Shield plans serving Maryland, Washington, D.C., and northern Virginia. CareFirst is the not-for-profit, nonstock parent holding company of CareFirst of Maryland Inc. and D.C.'s Group Hospitalization and Medical, affiliates that do business as CareFirst BlueCross BlueShield.

CareFirst made an administrative error that provided an incorrect ratio, which was used to approve the 35% rate increase. Without the error, the information in the rate filing wouldn't support the increase CareFirst sought, so the commissioner rescinded it.

Attempts to get comment from CareFirst weren't successful.

Under the commissioner's March 3 order, the rates approved in October are no longer in effect, and CareFirst should continue charging the individual policyholders at the rates they were paying before Jan. 1. Affected policyholders are to revert to their prior premiums until the health insurer files and receives approval for a revised rate.

"Residents can make a difference when they file complaints with the agency, even if they only suspect that the activity is unfair, abusive or excessive," said DISB Commissioner Gennet Purcell, in a statement.

The effective date of the new rate will begin after 90 days of notice of the new rates to subscribers, the department said. CareFirst also must refund affected subscribers for any overpayments, plus 5% interest.

Maryland Insurance Commissioner Ralph S. Tyler earlier this year found that the surplus of CareFirst BlueCross BlueShield's two biggest companies isn't excessive, but he urged the General Assembly to review the health insurer's surplus every five years (BestWire, Jan. 19, 2010). The report issued in January by the Maryland Insurance Administration set a surplus range for Group Hospitalization and Medical and CareFirst of Maryland.

At the time, a spokesman for CareFirst said that at year-end 2008, reserves for Group Hospitalization and Medical stood at $687 million, while reserves at CareFirst of Maryland were $394 million (BestWire, Jan. 19, 2010).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])