Health Insurer Cost Curbs Take Major Step in Legislature;

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Bill to Regulate Insurance Premiums Easily Passes Key Vote

Sacramento, CA — A bill by California Assemblymember Dave Jones that would require health insurance companies to justify and defend their rates and profits passed the Assembly Apppropriations Committeee today on a 12-5 vote, meaning that it will get a vote of the full Assembly by next week. It was a significant defeat of powerful insurance industry lobbying, said the Foundation for Taxpayer and Consumer Rights, a strong supporter of the bill, AB1554.

“No matter what health reforms are ultimately passed this year in California, Assemblyman Jones’ bill would keep down costs to the state, to employers and to individuals,” said Jerry Flanagan, health policy director of the nonprofit, nonpartisan FTCR. “It is particularly important to have these curbs on spiraling insurance premiums if either employers or individuals are required to buy health insurance.”

The legislation is similar to requirements in the auto insurance market under Proposition 103 that have saved drivers billions of dollars since 1988 and driven down California auto premiums in relation to other states. AB1554 would control the administrative waste and profiteering that allowed Blue Cross of California to keep, as overhead and profit, 50% of every premium dollar collected from individual policyholders, and that has increased insurance premiums to levels far above the increases in overall medical inflation.

The proposed legislation, AB 1554:

– Requires health plans to provide detailed financial information to the regulator with each premium increase request.

– Establishes a clear legislative directive that no rate, co-payment or deductible shall be approved or remain in effect which is deemed to be “unfair or excessive.”
– Allows consumers and consumer groups to intervene in rate review proceedings to ensure that the legislative intent is implemented.

FTCR noted with caution an amendment attached in committee that that exempts insurers from regulatory review if their premium increase is less than 5%, and their spending on medical care exceeds 90% of premiums.

“If the numbers in this amendment don’t change with further amendment, it is probably benign,” said Flanagan. “But if the percentage of allowable increase goes up, or the percentage requirement for medical care spending goes down, the effectiveness of the bill will be gutted. This amendment must not be treated by the industry as a Trojan Horse to be filled with numbers more favorable to their profiteering.”

FTCR said that even if plans request an increase of less than 5% they must still be required to meet all of the disclosure requirements of the bill, in order to provide proof of their spending on medical care.

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FTCR is California’s leading public interest watchdog. For more information, visit us on the web 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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