SANTA MONICA, CA – Kaiser’s announcement of a 40 percent increase in profits to $2.1 billion for the first half of this year is the latest in a string of hefty health insurer profit reports that illustrate why Proposition 45’s protections against price gouging are desperately needed, said Consumer Watchdog today.
Proposition 45 will prohibit excessive profits and require health insurers to get approval for rate hikes. It applies the same rules to health insurance that have saved California drivers over $100 billion since 1988, while making the auto insurance market highly competitive and profitable for insurers. More than 35 other states regulate health insurance rates, but not California.
After raising rates last January for individuals by as much as 22 percent and for small businesses by as much as 56 percent, Kaiser had some of the highest premium rates in California this year. Those high rates led to fewer Covered California Exchange enrollments than expected, but dramatically increased Kaiser's profits. Kaiser’s net income the first six months of this year was $601 million higher than the $1.5 billion reported for the same period in 2013.
“The gambit paid off for Kaiser,” said Rob Leonard of Consumer Watchdog, which is sponsoring Prop 45. “It is the premiums of price gouged consumers that make these huge profits for Kaiser and its overpaid executives. Without Proposition 45’s protections Californians will face steep rate hikes next year.”
On top of these massive profits, Kaiser has accumulated a reserve that, as of December 31, 2103 was $21.7 billion, or 1626% more than is required by the state.
Proposition 45 will allow the state to return excessive reserves to policyholders in the form of lower premiums. It will also allow for refunds of excessive rates paid since November 2012 and gives the insurance commissioner the power to reject unreasonable rate increases.
Even with its average 1.4% drop in California Exchange rates for 2015, Kaiser remains expensive compared to other insurers in California. This pricing strategy, combined with reduced benefits and services, and relatively modest membership increases, ensure more of the same – high prices and bloated profits and reserves – unless Proposition 45 passes.
The health insurance industry is riding a recent wave of big profits. Health Net’s second quarter profit increased 400 percent over the same period last year to $120.9 million. WellPoint’s profit was $1.4 billion for the first half of 2014. United HealthCare reported $2.5 billion in profit during the same period, and paid out $367 million in dividends.
“These massive profits are coming at the expense of consumers who have no protection from health insurer price gouging,” said Leonard. “Prop 45 will give beleaguered Californians relief from the merciless rate hikes health insurers are currently free to impose, while still providing fair industry profits,” he said.
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Paid for by Consumer Watchdog Campaign – Yes on 45, a coalition of consumer advocates, attorneys, policyholders, and nurses. 777 S. Figueroa St., Ste. 4050, Los Angeles, CA 90017. Major Funding by Consumer Watchdog Campaign and Thomas Steyer.