Gov’s Health Plan Must Provide New Rules Limiting Insurer Waste To Ensure Affordability;

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Rate Reviews That Saved Homeowners Nearly $500 Million in Recent Weeks Should Apply Equally to Health Insurance, Group Says

Santa Monica, CA – In a letter sent today commending Governor Schwarzenegger for supporting universal access to health care and taking on anti-consumer practices of health insurers, including refusals to provide insurance at any price to entire occupations, a consumer group proposed reforms to ensure that Californians will be able to afford the coverage that Schwarzenegger’s plan would require them to buy.  

Reforms are also necessary to keep health reform from busting the state budget. Click here to read the letter.

The Foundation for Taxpayer and Consumer Rights (FTCR) pointed out in the letter that California has time-tested tools for regulating insurance company overhead and profit under Proposition 103, which has saved Californians almost $500 million in recent weeks.

“Reining in the charges of insurers, HMOs and medical providers is critical to keeping health reform from busting the state budget, as well as family finances,” said FTCR Health Policy Director Jerry Flanagan. “The state will be paying to cover all children, and ultimately subsidizing coverage for hundreds of thousands of adults. If insurers are not required to justify their premiums and explain their expenses, health care reform will become an open-ended public trough at which private insurers will feed.”

FTCR said the danger of a plan such as Schwarzenegger’s, requiring individuals to buy health insurance from private health insurers without adequate reviews of what the companies can charge, is that it allows health insurers to raise rates at will and make basic coverage unaffordable for families. 

In the letter, FTCR wrote:

“Rate approval is far from revolutionary. Under Proposition 103, auto, home and other insurers must seek permission for and justify rate changes, a process that has saved homeowners nearly a half-billion dollars in recent weeks alone. With this oversight, the market for auto and home insurance has remained vigorous and profitable. Yet under your proposal, health insurers and HMOs do not have to either seek permission from regulators before raising rates or justify all their charges.”

In addition to rate regulation, FTCR proposed the additional reforms in the letter sent today:

– Allow any Californians to join a state self-financed buying pool run by CalPERS which bypasses insurers.  The governor’s plan offers such access only to the HMOs run by private insurers, who are reaping a captive customer base while preserving too much leeway over what they can charge.

– Require insurers to cover the sickest patients without requiring patients to impoverish themselves. The governor’s proposal calls for a health insurance purchasing pool to be administered by the Managed Risk Medical Insurance Board (MRMIB), whose last-resort policies currently pay no more than $75,000 no matter how sick the patient becomes or how many expenses are incurred, as with cancer treatments.  

Read about health insurance practices that refuse coverage for entire occupations like firefighters and for people with minor conditions like asthma, acne, and allergies. The governor pledged to end these anti-consumer practices.

In the letter, FTCR wrote:

“Last night in your State of the State address, you said of reforming California’s health care system, ‘We will get it done.’ It also must be done right. We are ready to work beside you on a plan that guarantees true affordability for all Californians.”

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The Foundation for Taxpayer and Consumer Rights (FTCR) is the state’s leading public interest advocacy organization. For more information visit us online at

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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