New federal law doesn't change Calif. health insurance debate

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Last week federal authorities announced the latest power granted to states under the health reform law: Regulators can scrutinize proposed health insurance rate hikes of 10 percent or more.

The news did little to change the landscape in California or to diffuse differences over a proposed bill that would allow regulators to deny rate hikes.

The new federal rules allow states to take a look at the math and reasoning that goes into boosting health insurance rates.

The announcement is expected to have little effect in California since a law granting similar powers took effect at the start of this year. That law says insurers must give regulators 60-days notice of rate hikes, which will be reviewed to determine if they are “actuarially sound.” The law also led health insurance regulators to post proposed rate increases online, which are available here for HMO plans and here for PPO plans.

Assemblyman Mike Feuer, D-West Hollywood, said the federal changes leave a major problem unsolved: Even if regulators find major problems with a proposed rate hike, they can’t stop it.

As the Los Angeles Times reported last week, such a scenario has already taken place:

One regulator, the Department of Insurance, has cajoled several of the state's largest health insurers, including Anthem Blue Cross and Blue Shield of California, to lower or cancel rate increases after scrutinizing their filings and drumming up public pressure.

But last month, a second regulator, the Department of Managed Health Care, acknowledged that it could do nothing to stop a 16 percent Anthem rate increase even though it had declared the hike 'unreasonable.'

For more Californians to afford health care, “that needs to change now,” Feuer said.

Feuer is carrying a bill that would require health insurers to submit proposed rate or co-pay hikes to regulators for prior approval. California authorities could deny premium increases they find “excessive, inadequate or discriminatory.”

The bill is up for a vote Friday in the Assembly appropriations committee.

Opposition to the law remains fierce and includes the California Hospital Association and California Chamber of Commerce.

The California Association of Health Plans, which represents major insurers, argues that rate regulation is an effort to put a lid on health expenses with no regard to an array of other costs, such as medications, surgeries and health professional salaries.

“The new proposed statute seeks to give regulators the power to delay or suppress rates without regard to the cost drivers that generate the rate,” said Patrick Johnston, the association's president and chief executive.

Johnston said the health reform law already has a variety of impacts on health insurers, such as requiring that they spend 80 to 85 percent of premium dollars on health care for beneficiaries – and send them rebate checks if they fall short.

The law also creates a state health exchange that will give individuals seeking to buy health insurance significant subsidies and access to competitively priced policies.