Health insurers’ insider power play in California

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The shameful way a legislative committee vote went down in
California yesterday tears the veil off how health insurance companies
and HMOs will fight in Washington against tough, honest health care
reforms. I thought I knew how Sacramento worked; I had trouble even
believing this one. And you’ll see below why you should go to Consumer
Watchdog and tell us your stories about outrageous premium increases for health insurance.

The bill (AB1218) was significant, and similar to a bill killed by the insurance industry 
in 2007. It would have regulated the rates of health insurers in the
same (and sane) way that premiums and rates are already regulated in
auto, homeowners and other types of insurance. The new bill lost
yesterday on cowardly refusals by committee members to vote at all,
depriving the bill of a majority.

With the number of significant health insurers in the state down
to five, and rates on health insurance policies rising far above the
rate of medical inflation, even families with comfortable income are
struggling to stay insured. We brought testimony from one family whose
premiums on a high-deductible policy from Blue Cross have risen more
than 300% since 2002, while their copays also rose. Premiums for their
three-person family are now over $1,500 a month. (Click here to send a story of your own.)

So when my colleague Doug Heller and I went to the hearing to
support the regulation bill, we thought it would pass the committee,
and would at least get a full Legislative vote.

It was no
surprise that the conservatives on the state Assembly Health Committee
voted no: these troglodytes missed the last few years of market
meltdown. They insisted during commitee debate that free markets are
self-regulating and all markets are competitive. What killed AB 1218
was five Democrats who voted no or–more shamefully–refused to vote at
all on the bill, killing it with their silence.

The author of the
bill, Assemblyman Dave Jones (who is also the chair of the Health
Committee), seemed stunned. He thought he had enough Yes votes, and
these guys do their math before they put something to a vote. Even one
member who had voted Yes on the previous similar bill voted No, before
changing his status to "not voting." Four others also declined to vote,
with the same effect as a No vote.Someone got to these folks. Their eyes were down as they sat silent.

Afterward, a few mumbled poor excuses, or scurried off from us. We’re
checking their records of insurance industry donations and lobbying for
more logical reasons for them to kill this bill. We’ll update with what
we find out.

Rate regulation goes like this: Insurers submit
significant rate changes to the state Insurance Commissioner for
approval and if they meet a generous standard of necessity, they get
approved. Consumer groups have an opportunity to protest, and sometimes succeed in curbing increases or demanding rate cuts.

The already-regulated auto and property insurance industry is
competitive, profitable and stable–and has been for 20 years, since
voters passed the regulation requirement known as Proposition 103.
Consumers have saved billions of dollars to boot.

One of the
things such regulation would mean in the health insurance industry is
lower administrative waste and overhead: Those that spent 90% of their
premium dollars on actual health care would scarcely even be subject to
regulation. Yet insurers were in the hearing room en masse to object to
the bill. They stared hard at the committee members as they spoke. This
is where I should mention that the health industry is among the top
financial contributors to state legislators.

Such overt
tactics–as well as nasty, manipulative and deceitful advertising–are
being employed in Washington, too. There is good reason to wonder
whether lawmakers in DC will also hang their heads as they go along
with insurers, at the expense of the financial and physical health of
Americans. Take a look at this previous post by Jamie Court to see how.

Watchdog is fighting back, in DC and Sacramento. We won’t hesitate to
say who’s on consumers’ side, and who’s not, and why

I should
mention that we had victories yesterday: another bill (AB2), to stop
illegal cancellations (known as rescissions) of individual health
insurance policies passed the same committee easily.

That was perhaps because of the flood of stories of
people canceled after they got sick, on the basis of trivial and
unrelated omissions or unknown conditions not mentioned in their
applications. People canceled because their weight was different than
on their policy. Or because of one high blood pressure reading that
their physician never told them about. Or a condition that the insurer
already knew about. Families ruined by huge medical bills, and insurers
assessed too-small fines when
the unjustified rescissions came to light. The companies were obviously
waiting until policyholders fell ill to even check applications, even
though they’re required to do so before issuing a policy.

Another bill, an effort by a single insurer to roll back Proposition 103’s consumer protections, stayed dead despite the companies’ efforts to revive it.

So that’s two out of three for consumers. But the one that got away was still a galling show of the power of the insurance industry in the Legislature.

As for the folks who were present but not voting on the bill to curb health insurance premiums, here they are. Click on the links or use the e-mail addresses to send them your opinion.

Marty Block (San Diego)

Wilmer Amina Carter (Rialto)

Isadore Hall (Los Angeles) [email protected]

Mary Hayashi (Hayward) [email protected]

Ed Hernandez (Baldwin Park) [email protected]

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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