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Read Making a Killing

home / healthcare / in the media

SFGate.com / Associated Press
Apr 07, 2003

by STEVE LAWRENCE, Associated Press Writer

Consumer advocates, Democrats eye state control on health insurance increases

SACRAMENTO (AP) -- A group of Democratic lawmakers and consumer advocates will propose legislation Tuesday to try to hold down skyrocketing health insurance costs by requiring state approval before insurers can raise their rates.

Consumer advocates say requiring state approval has worked well in limiting rate increases for auto insurance, the main target of Proposition 103, a ballot measure approved by California voters in 1988.

"Prior to (Proposition 103) we were having the same sort of problems with auto insurance rates that we're now having with health insurance," said Jerry Flanagan, a lobbyist for the Foundation for Taxpayer and Consumer Rights.

"Costs were going up. People were having to go (without coverage). It became a crisis in the state. ... You cannot allow the market to run away with itself."

But William Wehrle, chief lobbyist for the California Association of Health Plans, says health insurance rate increases are due to rising health care costs driven by technology improvements, an aging population and other reasons.

"You can't get rid of those factors by passing a law anymore than you can pass a law decreeing that it will always be 75 degrees and sunny out," he said.

Flanagan's group, which is headed by Harvey Rosenfield, the chief author of Proposition 103, is backing a bill by Sen. Liz Figueroa, D-Sunol, that would require a health insurer to get approval from the state to raise rates or patient co-payments.

Twenty-six states already have a "prior approval" requirement for health insurance.

Proposition 103 required permission from the state insurance commissioner to raise rates for a number of types of insurance, but health insurance wasn't covered.

Health insurance premiums jumped an average of 13 percent last year in California, six times the state's rate of inflation, according to a survey by the Kaiser Family Foundation and the Health Research and Educational Trust.

The increase was slightly higher than the average national increase, which was 12.7 percent last year and 11 percent in 2001.

But average premiums in California were still about 8 percent lower than national insurance costs, in part because of the higher enrollment rate of Californians in lower-cost health maintenance organizations, the survey said.

Wehrle said health insurers are not high-profit enterprises, with average profits typically running 2 percent to 5 percent.

"Nowhere else in America is that considered an excessive amount of profit," he said.

"And half of the health plans in California covering half the members are not for-profit, and they have the same premium increases, because those premium increases are driven by cost pressures."

But Business Week magazine reported last week that many of the biggest health insurers in the country are posting "stellar profit gains" for the third straight year because of escalating health insurance costs.

Figueroa said higher health insurance costs and big increases in workers' compensation insurance are putting a squeeze on small businesses.

"Small businesses have had average increases of close to 20 percent for three years in a row," she said. "Small businesses have been coming in saying the cost of health insurance and workers' comp are making it very difficult for them to continue doing business in the state."

Her bill would require insurers to file detailed financial information to support a rate increase request and bar rates that are "unfair or excessive." It would also allow consumer groups to intervene in rate-increase proceedings.
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On the Net: Read the bill, SB26, at www.senate.ca.gov

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