Put Insurers’ Spending and Profit Front and Center in Reform Debate, Says Group

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Businesses Must Join Consumers to Resist Industry’s Political Clout

Santa Monica, CA — The health reform proposals and ideas taking center stage in Sacramento are missing plans to control HMO and insurer costs, a necessary pillar of successful health care reform, said the Foundation for Taxpayer and Consumer Rights today. The consumer advocates contend that the political contributions and clout of insurers have bought insurers a free pass among elected officials in Sacramento.

“The proposals being touted so far all depend on the graciousness of private insurers,” said Jerry Flanagan, health director of  FTCR. “Politicians cannot continue to bow to the political power of the insurance companies while claiming the mantle of reform.”

Health insurers have contributed $3.7 million to members of the Assembly, Senate, Governor Schwarzenegger and affiliated political campaigns since 2005. Since taking office, Schwarzenegger has received $775,000 from health insurers, HMOs, and their executives.  To view a list of political contributions from major insurers and top company executives, go to:  

The proposals from the legislature, including promised legislation by Senate leader Don Perata and by Kaiser Permanente executives, among others, would require employers and patients to buy health insurance. They are reminiscent of a slew of bills in 2003 that promised profiteering health insurance companies a vast new customer base with no requirement for cost-cutting at the source: the insurance companies themselves. 

Those proposals resulted in an employer requirement to provide insurance (SB2) that was narrowly overturned by voters in a blitz of negative ads by businesses that feared out-of-control costs. It’s a lesson that has to be incorporated into the new push for health care reform, said the nonprofit, nonpartisan FTCR. The so-called “shared responsibility” approach being offered in multiple proposals and favored by Gov. Arnold Schwarzenegger must include controls on insurance companies that re are responsible for making health care unaffordable, the group said.   

Insurers must be required to reduce their waste, administrative bloat and excessive profits, said FTCR, adding that the consumer-friendly concepts behind the Proposition 103 auto insurance reforms provide a well-developed, broadly accepted starting point.  Since 1988, Prop 103 has saved California motorists about $24 billion, according to the Consumer Federation of America.

Health insurer and HMO overhead are the fastest growing portion of health care costs.  The aim must be regulation that:

– Caps administrative overhead and regulates rates while allowing the companies a fair return;
– Curtails executive bonuses, which reached $240 million for one executive in recent years;
– Prevents shifting excess profits to out-of-state parent companies;
– Ends insurers’ practice of courting the healthiest prospects and rejecting or “pricing out” anyone who is ill or could become ill.

“This is an opportunity for business owners and consumers to join forces to counter the political power of insurers in Sacramento,” said Judy Dugan, research director for FTCR.  “If employers don’t support reform of insurance industry practices, the insurers will reap billions at the expense of taxpayers, employers and patients.”

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading public interest advocacy organization. Visit our website 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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