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Insurers eager to maintain authority over healthcare premiums

A 2014 initiative would let the insurance commissioner reject health premium hikes deemed excessive. Insurers have begun their campaign against it in earnest.

March 26, 2013|Michael Hiltzik
  • Health insurers are "continuing to raise rates with impunity," says California Insurance Commissioner Dave Jones. And, Michael Hiltzik writes, Jones knows the reason: State law doesn't require his approval before a health insurance premium goes into effect.
Health insurers are "continuing to raise rates with impunity,"… (Katie Falkenberg, Los Angeles…)

While most of us face uncertainty with the rollout of healthcare reform, some insurance companies in California have been feeling their oats lately. Here's how they're responding to Insurance Commissioner Dave Jones' warnings that their latest rate increases are unreasonable: Stuff it, Dave.

That essentially was the response of Blue Shield of California and Anthem Blue Cross after Jones flayed their proposed premium hikes — up to 20% for Blue Shield customers and up to 18% for Anthem. The companies moved to implement the increases anyway, although Anthem thought better of it after it started charging the higher rates, and reduced them a bit. Anthem further said it would start passing on to customers a fee related to the federal Affordable Care Act this year, which Jones considered unlawful since the government fee doesn't go into effect until next year.

Do you sense a trend? Jones does. "They're continuing to raise rates with impunity," he told me recently. And he knows the reason: State law doesn't require his approval before a health insurance premium goes into effect.

Jones has been fighting for prior approval of health insurance premiums for six years, dating to his terms as an assemblyman from Sacramento. About 34 states give government officials such authority, although the extent of the pre-approval power varies and not every state exercises it with the utmost vigor.

In California, the insurance lobby repeatedly killed pre-approval proposals in the Legislature, so the issue will appear as an initiative on the ballot in November 2014. That's an unconscionably long time to wait for a crucial piece of the health insurance reform jigsaw, but on the plus side, if it passes it will be retroactive to last November. Any rate increase deemed to have been excessive in the interim would have to go back to customers via refunds.

Health insurance is an outlier in terms of the authority of the insurance commissioner, whose power of prior approval over auto and property and casualty insurance has probably saved Californians billions on their insurance bills.

But health insurance was left out of Proposition 103, the 1988 ballot measure that gave the commissioner authority over those other insurance lines. Health insurance wasn't such a burning issue then, says Jamie Court, president of Consumer Watchdog, which created Proposition 103 chiefly to bring auto rates under control. Court's group drafted the new measure and got it on the 2014 ballot.

The initiative process will lend itself to a lot of misleading commentary by opponents of the measure. In fact, the process is already well underway. To begin with, the opposition is calling itself "Californians Against Higher Health Care Costs," which is a clever, if typically dishonest, way of describing opposition to a measure designed to reduce healthcare premiums.

The backers of the group include the usual know-nothing and do-nothing types such as the California Chamber of Commerce, abetted by industry front groups trying to suppress patients' rights to sue for malpractice, and hospital and physician groups afraid that their income will be hacked at by insurance companies trying to meet premium approval standards.

The major funders, however, are five health insurers whose rates would come under the insurance commissioner's control: Blue Shield, Kaiser, Anthem Blue Cross, Health Net and United Healthcare.

That's what contributes the comic relief to their effort, for their major talking point is that the initiative has been designed by a "special interest group" to give "ONE POLITICIAN control over our health care." (The capital letters are theirs, not mine.)

Let's unpack this a bit. What they really mean by a "special interest" is a special interest other than them. Here's how these five insurance companies have protected their own interests in Sacramento: by political contributions totaling more than $8.6 million over the last four years, and lobbying expenditures totaling $18.7 million in the same period.

One would have to say those interests look pretty "special." As an added dividend, they explain all by themselves why prior approval couldn't get passed in the state Legislature to save its life.

By the way, that ONE POLITICIAN is Insurance Commissioner Jones, who serves at the pleasure of the voters. Direct political donations from those five insurance companies accepted by his 2010 campaign: zero. No wonder they're unhappy about placing rate approval in his hands.

The downside of going without prior approval of healthcare rates will become only more glaring as implementation of the Affordable Care Act continues.

The landmark 2010 healthcare reform measure eliminates insurers' ability to reject any customer for health reasons, limits the difference in rates that can be charged older versus younger customers, and requires that at least 80% of premiums be spent on actual medical services.

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