SB 26 Will Protect Consumers and Business by Requiring “Prior Approval” of Health Insurance Rates

Yesterday, Blue Shield of California’s CEO, Bruce Bodaken, announced details of his plan to raise taxes to pay for universal health insurance but failed to promise to rein in excess administrative costs and overhead.

“It is disingenuous for a health insurer to call for new taxes when the industry is recording record profits, administrative costs and surpluses,” said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights (FTCR). “Universal access to health care is too important to be railroaded by health insurers out to profit from the state’s uninsured.”

Bodaken proposed a sales tax increase to pay health plans for providing care to the state’s uninsured.

– According to the California Medical Association‘s newest report investigating health plan financing, Blue Shield, a “non-profit” insurer spent 13.2% of revenue on administrative costs.

– According to a November 11, 2002 Sacramento Business Journal article, “HMO’s Profits are Soaring”, Blue Shield of California reported net income of $84.3 million on revenue of $2.3 billion for the first six months of 2002, up 562 percent from net income of $12.7 million for the same period last year.

– In 2002, Blue Shield recorded the 4th worst “medical loss ratio” — amount of money spent on actual healthcare — of the state’s non-profit insurers.

– As of September 2002, Blue Shield had more the 350% of required cash reserves, or $406,863,000.

“Experience has shown that health insurers have no qualms with charging double digit premium increases and spending up to 22 cents of every premium dollar on overhead,” said Flanagan. “It’s not surprising that they would support a plan that would guarantee them new customers while avoiding proper oversight of their rates.”

A new bill, SB 26, by Senator Figueroa, Senate President Burton, and Assembly Member Laird would require health insurers to get state approval before raising premiums, co-payments or deductibles. The measure is co-sponsored by AARP and FTCR. SB 26 would require a thorough review of an insurer’s finances before new premiums, co-payments, or deductibles could be passed on to consumers and businesses.

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