Restrictions on Insurers Proposed

Proposals in California to limit health insurers' profits and cap out-of-pocket expenses for medical care "underscore a growing backlash against the health insurance industry from consumer advocates and lawmakers who say insurers must absorb a greater share of rising costs," the Los Angeles Times reports.

HMO profits increased from $640 million in 1996 to $2.7 billion in 2005, according to the California HealthCare Foundation. Meanwhile, premium costs have increased for nearly 10 years at a faster rate than inflation.

The California Medical Association is sponsoring a bill (SB 1591) that would limit insurers' administrative costs, including profits, to 15% of health insurance premiums. Current law does not include profits in a 15% limit set on overhead. The bill was approved by the Senate last week and will be heard in the Assembly.

A separate proposal (AB 2281) by Assembly member Wilma Chan (D-Oakland) was narrowly defeated in the Assembly on Wednesday. The bill would have limited out-of-pocket expenses to $5,250 for individuals and $10,500 for families. Chan said she may reintroduce the bill with a sponsor in the Senate.

Insurance Commissioner John Garamendi (D) also has proposed increasing the percentage of premium dollars insurers must spend on medical care. Currently, insurers are required to use 50% of premiums for medical treatment.

Health insurers oppose plans to cap expenses and profits, saying doing so would stifle innovation and limit consumers' options for purchasing insurance. Some insurers and health experts also say the proposals would not solve the underlying causes of increasing health care costs (Yi, Los Angeles Times, 6/2).