Bill would rein in increases to health insurance

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Oakland Tribune

SAN FRANCISCO — With no relief in sight from rising health insurance costs, three lawmakers introduced a bill Tuesday requiring state approval before health insurance companies can increase premiums, co-payments, deductibles or other charges.

“The health care marketplace is badly broken,” said state Sen. Liz Figueroa, D-Fremont, who introduced the bill. “This is a very modest step to make sure profits never come before the health of our constituents.”

The legislation would require the state Department of Managed Care, which regulates HMOs, and the Department of Insurance, which regulates PPOs, to approve all health insurance rate hikes before they are imposed on consumers. The departments would also be required to review all rate increases since April 2000 and refund consumers’ insurance costs that do not “satisfy specified criteria” yet to be determined, according to the bill.

The bill — S.B. 26 — is co-sponsored by Senate President John Burton, D-San Francisco, and Assembly Member John Laird, D-Santa Cruz.

Last year, health insurance premiums rose by an estimated 20 percent for most California businesses. Those hikes were largely passed on to consumers. Some 61 percent of companies with 200 or more employees raised the amount that their employees paid for health benefits last year, according to a Kaiser Family Foundation and Health Research and Educational Trust survey of employer health benefits.

Meanwhile, consumers are paying more for fewer benefits. In 2002, more employers decreased health benefits than increased them, the Kaiser Family Foundation study found.

The lawmakers and bill supporters point to earnings increases of 400 to 600 percent among major health insurance companies during the past year as proof that health insurance rates need oversight.

“It’s excess largesse in the system,” said Jerry Flanagan, consumer advocate at the Foundation for Taxpayer and Consumer Rights, a bill supporter.

But health insurance companies say that rising premiums are a result of an aging population, higher drug costs, technological innovation in health care and greater hospital expenses — not their profits.

“When you hear talk about turnaround (to profitability) of health plans, you have to look at where they are coming from — near bankruptcy,” said Bill Wehrle, vice president of legislative affairs for the California Association of Health Plans.

Profit margins for the eight major health plans in California were an average of 1.6 percent in 2002, Wehrle said. Excluding the two major health plans that are nonprofit — Kaiser Permanente and Blue Shield of California — profits were around 2 percent, he said.

“The result of this bill will be that everyone will be paying attorneys millions of dollars to fight about rates,” Wehrle said.

The bill is modeled after Proposition 103, a 1988 ballot initiative requiring auto, homeowner and other insurers to seek state approval for rate increases. Auto insurance rates have since stabilized, Flanagan said.

Tom Epstein, spokesman for Blue Shield of California, which introduced legislation this winter that would require companies to insure their employees, says regulating health plans won’t reduce premiums.

“Even if you eliminated all profits for health plans and the CEO salaries, premiums would still go up,” Epstein said. “We need to work on changing the whole system, and insuring the uninsured.”

Figueroa said that by regulating rates, the threshold for the uninsured to pay into the system will be lowered. The majority of the 6.5 million uninsured people in the state are from working families who cannot afford health care premiums and yet make too much money to qualify for state assistance, Figueroa said.

Laura Moe is one such person. Moe, 61, owns an event video production company in Novato and said that health insurance costs too much for someone her age. The cheapest package she could find would have cost her $320 a month.

“Hopefully, Medicare will be there when I turn 65,” Moe said.

Health insurance premiums remain lower in California than in other states — about 8 percent less than the national average, according to the Kaiser Family Foundation study.

Study authors attributed this to the high level of enrollment in HMOs — 54 percent of Californians are insured through HMOs compared to 26 percent nationally.

“The number of businesses who say they will drop their coverage because of premiums going up is small,” said Erin Holve of the Kaiser Family Foundation, who authored the study on premiums. “But that doesn’t mean that businesses won’t pass those costs onto their employees.”


Contact Rebecca Vesely at: [email protected]

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