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Hamm rejects Blues rate increase

BISMARCK -- North Dakota Insurance Commissioner Adam Hamm has denied a requested 14.8 percent Blue Cross Blue Shield's rate increase for individual policies, saying the company misled medical providers and his department and didn't substantiate its request.

The issue is not just this rate increase request, he said Friday in announcing the decision.

"The message to Blue Cross Blue Shield today is very simple. They need to change the way they act and conduct themselves with respect to the Insurance Department or denial of rate increases will become the norm," he said. "Hopefully they are going to take my message to heart."

BCBS has 90 percent of the state's total health care insurance market.

For the 30,000 North Dakotans who buy individual BCBS policies, at an average cost of $4,800 in annual premiums, Hamm's decision means their rates will not change. Had the increase been OK'd their premiums would have leaped to an average $5,500, he said, or a total of $11.2 million more.

Each year, BCBS submits rate increase requests to the Insurance Department, once for group policies and once for individual policies.

BCBS hasn't said what it will do now. One option it has is to revise and resubmit the request. Or it take the department to a hearing or forgo an increase this year, Hamm said.

The company is "surprised and disappointed by the announcement from the insurance commissioner this morning," BCBS spokeswoman Denise Kolpack said Friday.

She said BCBS will have more comment next week after it receives and examines "the specific rationale about the disapproval."

Hamm said several factors influenced the decision. BCBS gave him incomplete information, the information it did provide was unreliable and state law requires a rate increase "be disapproved if the benefits provided are unreasonable in relation to the premium charged."

He said BCBS misled the Insurance Department concerning payments to healthcare providers, and stonewalled the department when it sought information.

"As a result, I denied this request," Hamm said.

He said the Friday's decision has its roots in events that began last fall, even before he became commissioner on Oct. 22.

In September, BCBS asked the Insurance Department for a 17.3 percent rate increase for group policies, which was to include a 5.6 percent increase in payments to health care providers. Two days after Hamm took office, Oct. 24, he notified BCBS he wouldn't approve a 17.3 percent increase. He did OK a 9.9 percent increase and told BCBS his department would monitor claim experience and payments to health care providers to check on assumptions BCBS had used in the rate request.

The company put in for the proposed 14.8 percent hike for individual policy holders on May 6, saying it, too, included a 5.6 percent increase for health care providers.

But, about three weeks later, BCBS notified health care providers that it was cutting their payments by up to 2.5 percent, called a provider withhold, effective Aug. 1, citing expected underwriting losses.

On June 24, Hamm's office sent BCBS a letter asking for detailed information about the provider payment reduction because it affects the cost assumptions the company used to justify the rate increase. BCBS missed a July 1 deadline to send the information, and when it did send more information on July 3, it was incomplete, Hamm said.

"They told the providers one thing, and told the department one thing and now they're doing another," he said. "Once your numbers start becoming a moving target, this department cannot have faith in those numbers and must deny the request."

He said, "Blue Cross Blue Shield needs to start dealing fairly with the health care provider community." It should not dictate a "take it or leave it" contract offer to health care providers and then also unilaterally change the contract.

BCBS is not going to have an underwriting loss this year, Hamm said. "The data we have is showing a much stronger year potentially compared to what they're indicating to the provider community."

For the last seven years BCBS has had "all financial ups" and the only financial down, in 2006, reflects at $26.5 million refund that it gave after being pressured by former Commissioner Jim Poolman, who said their surplus was too large.

Janell Cole works for Forum Communications Co., which owns The Dickinson Press.