CFC Supports AB 2578 (Jones) – Regulating Insurance Rates

Bill Status: AB 2578 (Jones) passed the Assembly by a vote of 43 to 28 on June 2nd, the Assembly Appropriations by a vote of 12 to 5, and the Assembly Health Committee on March 23rd by a vote of 13 to 5, with 1 abstention.

CFC Position: Support

Bill Summary: The Consumer Federation of California supports AB 2578, a measure that would require prior approval from the Department of Managed Health Care (DMHC) or the Department of Insurance before an HMO or health insurer can increase insurance rates charged to policyholders or subscribers beginning January 1, 2011.  Rates requiring approval include premiums, co-payments and deductibles. 

As the state’s economy continues to decline, more consumers in California are making the tough choice as to whether they can afford purchasing health insurance for themselves and their families. Consumers who have employer-based coverage are finding it more difficult to afford their premium co-payments. Health insurance premium increases are soaring above the rate increases for wages, inflation and medical costs. Small businesses are finding it difficult to pay for their employees’ health insurance contribution.

Unlike auto insurers who are required to seek prior approval from the Department of Insurance before increasing auto insurance rates, HMOs and health insurers have no similar requirement.  Additionally, some highly profitable health insurers and HMOs transfer large blocks of funds to out-of-state parent companies while continuing to implement rate increases on California consumers. AB 2578 will give the state a powerful tool to control unabated rate increases from HMOs and health insurers.

For all these reasons the Consumer Federation of California urges an AYE vote on AB 2578.