Yes on 45: Rate Challenges Have Saved Consumers $3.063 Billion Since 2002 On Auto, Home and Business Insurance Rates, Showing How Prop 45 Will Save Consumers Up To $1 Billion Annually On Health Insurance

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SANTA MONICA, CA – Public challenges to insurance rate requests have saved consumers $3.063 billion on auto, homeowners and medical malpractice policies over the last 12 years, demonstrating the potential savings under Prop 45 which applies the same limits on health insurance rates, Consumer Watchdog said today.

Proposition 45 on the November ballot would require health insurance companies to justify their rates and give the Insurance Commissioner the same authority to reject excessive rates that he has for auto, homeowners and small business insurance under Proposition 103, which voters passed in 1988.

“We estimate that Prop 45 will block up to $1 billion a year in excessive health insurance rate increases, saving the average California family about $612 a year,” said John M. Simpson, an advocate with Consumer Watchdog.

View a chart of the Consumer Watchdog’s rate proceeding interventions and the resulting savings here:

Consumer Watchdog projected up to $1 billion in annual health insurance rate savings under Prop 45 based on successful property insurance regulation under Proposition 103 and successful health insurance regulation in other states.

Read that analysis here:

Currently California regulators can say a health insurance rate increase is “unjustified” but can do nothing to stop it from going into effect. Over the last two years, nearly 1 million California policyholders faced $250 million in health insurance rate hikes that were deemed “unreasonable” – but that regulators had no power to stop.

Critical to the success of Prop 103’s regulatory system is the ability of consumers to intervene in the rate review process to challenge unjustified rate increases, Consumer Watchdog said.  When granted “intervenor” status, insurance companies are required to pay the legal and expert fees of the consumer representative. The process is based on a similar intervenor system in effect at the Public Utilities Commission.

Since 2002, Consumer Watchdog has challenged 79 rate requests resulting in a total of $3.063 billion in savings. Only seven cases went to a full hearing before an Administrative Law Judge.  The others were settled before a hearing.

The largest category of rate savings from Consumer Watchdog’s rate challenges came in auto insurance, where Consumer Watchdog’s work saved consumers $1.683 billion. The group’s interventions in homeowners insurance rate applications – including earthquake insurance –produced savings of $1.303 billion, while opposition to rate hikes in the price doctors pay for medical malpractice insurance resulted in savings of $77 million.

Over those 12 years, Consumer Watchdog received $4.2 million in reimbursement for its legal team. Outside counsel and experts, including actuaries, who worked on these cases were awarded $4.8 million for their work in the same period. Payments to both categories totaled $9 million in the last 12 years. For every $100 saved for consumers, challengers were reimbursed 29 cents.

“When you look at these massive savings for motorists, homeowners and small businesspeople under Prop 103, it’s no wonder the health insurance industry is willing to spend millions of dollars of our money trying to defeat Prop 45, which will bring even more savings on our health insurance bills,” said Simpson.

In a recent case, State Farm asked for an overall rate increase of 6.9% for its homeowners policies. Consumer Watchdog investigated the request and argued that it was excessive. It was later reduced to a 1.2% decrease for a total savings of $86 million in annual premiums, or an average of $53 per policyholder.  In another example Allstate asked for a rate increase of 6.1% on its auto policies.  It was ultimately cut to a 0.2% decrease, for a total savings of $92 million in annual premiums, or an average of $47 per policyholder. In a medical malpractice insurance case Doctors Company asked for a decrease of 7.3%. The rate was ultimately set at a decrease of 10% for a total savings of $5.689 million in annual premiums, or an average of $282 per policyholder.

These savings figures represent only the amount trimmed from the rate requests that were challenged by Consumer Watchdog in the last twelve years.  It does not include savings from challenges by other consumer groups or reviews by the Department’s own rate regulation division that resulted in lower rates. Analysts also say that because of Prop 103’s protections, insurance companies submit lower rate requests than would have been the case without the law.  Consumer Federation of America estimates that Prop 103 has saved consumers $102 billion since it was passed in 1988, and as a result, California is the only state in the nation where rates are actually lower today than they were twenty-five years ago.

Proposition 45:
•    Requires health insurance companies to publicly disclose and justify, under penalty of perjury, proposed rate hikes before they take effect.
•    Gives Californians the right to challenge excessive and unfair premium rate increases.
 •   Authorizes the elected insurance commissioner to reject unjustified rate increases, a power that is the law in 35 other states, but that no California official or agency has today.

Health insurance companies have contributed $37.5 million to the campaign against Prop 45. Top funders are Anthem Blue Cross giving $12.8 million, Blue Shield of California at $9.7 million and Kaiser Foundation Health Plan with $14.6 million.

Proposition 45 is backed by Consumer Watchdog, the California Nurses Association, and a broad coalition of consumer, labor, low-income, senior and healthcare organizations and providers, as well as U.S. Senator Dianne Feinstein, who unsuccessfully sought to insert Prop 45’s rate controls into the Affordable Care Act.

For more about Proposition 45 visit:

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Paid for by Consumer Watchdog Campaign – Yes on 45, a coalition of consumer advocates, nurses, attorneys, and policyholders.  777 S. Figueroa St., Ste. 4050, Los Angeles, CA  90017.  Major Funding by Consumer Watchdog Campaign and California Nurses Association.

John M. Simpson
John M. Simpson
John M. Simpson is an American consumer rights advocate and former journalist. Since 2005, he has worked for Consumer Watchdog, a nonpartisan nonprofit public interest group, as the lead researcher on Inside Google, the group's effort to educate the public about Google's dominance over the internet and the need for greater online privacy.

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