Blue Shield of California is planning rate hikes of 59% for some and arrogantly calls them “reasonable [and] not excessive.” Yet the state can do nothing to block it. This is called regulatory capture. Private companies rig the rules via lobbyists and pliant politicians so that regulatory agencies have no power.

Blue Shield did promise refunds to policyholders if the auditor they hired to investigate themselves found their rates to be excessive. Now hold on for this shocker – the auditor, who presumably was paid very well by them, said their rates were not larcenous, predatory or anything like that and instead were just due to the magic of the marketplace or some such evasive blather. In another gaping loophole, any refunds made by Blue Cross would of course be voluntary.

It gets worse. The California Department of Insurance has no power to block rate hikes. It’s obvious this has been engineered that way on purpose.

Regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for large firms to produce negative externalities. The agencies are called Captured Agencies.

The California Department of Insurance is a captured agency.