Insurers, Advocates Face Off Over Rate Regulation

Assembly member Mike Feuer (D-Los Angeles) said the issue boils down to this:

“In the United States, health care costs went up 3.4% last year. At the same time in California, health care premiums went up by as much as 39%,” Feuer said. “Medical costs are going up, no question. But premium costs are going up much more quickly, and that’s the gap we’re trying to bridge here.”

That’s the point of AB 52, heard yesterday in the Assembly Committee on Health. The bill was co-authored by Feuer and Jared Huffman (D-San Rafael) to give the state’s insurance commission the power to review premium rate hikes by health insurers, and to limit them if they’re deemed excessive.

Advocates point to the recent run of double-digit rate hikes, which are particularly high in the individual market and for small businesses. California Insurance Commissioner Dave Jones said that the five major health insurers in the country cleared a combined $11.7 billion in profits last year. Those huge profits, juxtaposed against the struggle of so many Californians to pay  rising health care premium costs, makes a strong argument to regulate large rate hikes, Jones said.

“We regulate rate hikes for auto, property and casualty in exactly the same way right now,” he said. “And insurers at that time argued that they would go out of business or leave the state, and that didn’t happen.”

But there’s a critical difference in dealing with health care insurance, according to Charles Bacchi, Executive Vice President of the California Association of Health Plans.

“People aren’t cars,” Bacchi said. “[Health insurers] pay for medical services, we pay for wellness visits, we pay for chronic conditions, those are fundamentally different things about the claims we pay. It’s a much different thing.”

Asking health insurers to deal with another level of state regulation is too much, Bacchi said, given last year’s passage of a bill that requires state review of insurance rate hikes.

“The rate review process is still in the throes of being implemented,” he said. “Policymakers have to give this time to work.”

The real villains, Bacchi said, are the rising costs behind health care, as well as the low reimbursement rates for Medicare and Medi-Cal. Bacchi said low reimbursement rates for government programs force those with private coverage to subsidize the losses from Medicare and Medi-Cal.

That was the concern echoed by many of the legislators’ questions and position statements about AB 52 at the hearing.

“The need to lower health care premium costs is real,” Assembly member Richard Pan (D-Sacramento) said. “I’m just not sure this is the right mechanism for doing this.”

Physician groups and hospital groups also opposed the bill, primarily because of concerns that cutting health insurer profits would end up resulting in compromised patient care and cuts to providers.

“Providers are already being squeezed,” Jones said. “It’s not about regulating health costs, it’s about getting insurers to charge reasonable premiums, given those costs.”

The Assembly Committee on Health approved the bill and sent it to appropriations.