Consumer Federation of California

Excessive health insurance rate increases have placed health care coverage out of the reach of 8.2 million Californians ‘ with millions more barely making ends meet due to industry profiteering. While the rest of us are sacrificing to get by with less, from 1999 to 2009 health insurance rates soared 131% – nearly five times the rate of inflation.

Further, businesses are finding it difficult to pay for these rate hikes, and pass the increased costs on to workers.  Business owners and employees are forced to absorb these rising costs or search for less expensive ‘ and less comprehensive ‘ coverage options.  

While workers and businesses struggle in the face of an ongoing recession, a California non-profit health insurance company lavished its CEO with a $4.6 million salary last year and then proposed premium rate hikes as high as 59% in 2011. In April, Anthem Blue Cross raised rates on 120,000 California customers by 16%, despite a finding by state regulators that the increase was unreasonable.

The State of California should have the authority to minimize the damage caused to the health and well being of families and businesses by an out of control industry. Controlling skyrocketing health insurance rate hikes is of paramount importance to the future of our state ‘ and there’s a bill in the California Legislature that would do just that.

AB 52: Regulating Health Insurance Rate Increases

AB 52 (Feuer) would give state regulators the same approval authority over health insurance and HMO rates that have been in place for homeowners and automobile insurance policies since 1988. A national study found that California’s automobile insurance rate regulation saved consumers over $62 billion dollars in a 20 year period.

This critical measure would force insurers to provide proof to the Insurance Commissioner or the Department of Managed Health Care (for HMOs) that proposed rate hikes are justified. Under this bill, the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) would have regulatory authority to approve, deny, or modify excessive rate changes. It requires plans and insurers to submit to the departments explanatory information, allows the departments to hold public hearings, and gives the public the opportunity to comment on proposed rate changes. It also prohibits insurers from proposing rate changes on each product more than once per year.

AB 52 strengthens and expands upon existing federal and state laws for health insurance rate review.  Under the federal Affordable Care Act (Public Law 111-148), the federal Secretary of Health and Human Services must establish a process for reviewing unreasonable health insurance rate increases. Before implementing an unreasonable increase, health insurers must submit and publicly post online a justification for such an increase. Draft regulations for rate increase disclosure and review are pending.

State law requires health plans and insurers to submit detailed data and actuarial justification for rate increases at least 60 days in advance of increasing their customers’ rates. The actuarial analysis must be performed by an independent actuary who is not employed by a plan or insurer.  The departments may post online rate changes submitted by insurers, if a rate filing contains inaccurate information, or if an insurer’s unreasonable rate increase is found to be unjustified.

Currently, DMHC and CDI have the authority to review whether or not proposed rate increases are excessive, unjustified, or unfairly discriminatory, but neither department has the authority to reject such an increase. AB 52 would grant departments the authority for this crucial consumer protection.

The recent enactment of federal health care reform ‘ and the accompanying individual mandate – makes AB 52 all the more essential. Without AB 52, millions of Californians will be at the mercy of the insurance industry ‘ forced to purchase health insurance with no restriction against premium rate profiteering.

Over 30 other states across the nation have successfully given their insurance commissioners the authority to reject excessive health insurance rate hikes. It is time we do the same here in California.

AB 52 Approved by State Assembly

Despite health insurance industry lobbyists swarming the state capitol the California State Assembly approved AB 52 (Feuer) on June 2nd. The vote was 44 in favor, 7 opposed, and 29 not voting (same as voting No). The bill now moves to the State Senate, where insurance industry lobbyists will ratchet up their vehement opposition.   

We’re urging all California consumers to let their legislators know we want and deserve affordable health insurance. We can’t risk having our voices drowned out by insurance lobbyists’ full court press. Take action! Tell your Senator to vote Yes on AB 52.