Health & Welfare | Daily Report

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A controversial bill that would allow state regulators to prohibit “excessive” health insurance rate increases was passed by a key legislative committee yesterday.

The bill would allow health insurance regulators to approve, deny or modify proposed hikes in health insurance premiums, co-pays or deductibles.

The bill hearing drew a phalanx of consumer, senior citizen and community-based groups in support. Some of the major health lobbying groups in California, including representatives of hospitals, doctors and health insurers, came out to oppose the bill.

Assemblyman Mike Feuer, D-West Hollywood, wrote the bill and said it is meant to address a simple problem: Health insurance rates have gone up far more dramatically than health care costs.

An Assembly Health Committee analysis prepared for the bill says health premiums have gone up 134 percent since 2002, while the inflation rate increased 25 percent, according to the California Employer Health Benefits Survey [PDF].

Feuer said 35 other states allow regulators to approve rate increases and cited research by the state of New York, which saw “excessive” rate hikes when it briefly deregulated its health insurance market.

Insurance Commissioner Dave Jones testified that the power his office gained under a law passed last year is not enough. The law allows Jones to call for an independent actuary to review a proposed rate hike.

Supporters of the law note that the state insurance commissioner does have the power to approve or deny car insurance rate hikes. Whether or not such regulation can be linked to consumer savings on auto insurance remains a controversial question.

The bill passed out of the Assembly Health Committee yesterday over the objection of major insurers, the California Hospital Association, California Medical Assocation and Chamber of Commerce.

Opponents of health insurance rate regulation said lawmakers should give the newly granted rate-review process a chance to work before passing a new law.

Charles Bacchi, executive vice president of the California Association of Health Plans, which represents insurers and managed care, testified that the bill could create a $40 million bureaucracy to deal with the new requirements.

He also predicted that California health insurers will see more financial pressure when health reform policies come into effect and expand the number of Californians on Medi-Cal by 3 million people. He noted that the Medi-Cal program pays such low premiums that doctors and hospitals turn to health insurers to make up for the lost revenues. 

Among the most controversial aspects of the bill is that it would allow any consumer to “intervene” in a regulator's decision by filing a civil lawsuit. Essentially, that aspect of the law would allow anyone acting in the public interest to sue health insurance regulators if they disagree with a rate-hike decision.

Assemblyman Allan Mansoor, R-Costa Mesa, asked whether money might be better spent on health care than on lawsuits.

Feuer said those who sue will have to pay their own up-front legal costs.