Should Insurers Raise Rates Whenever They Want?

Health insurers typically raise rates when customers reach a higher age bracket. It’s pretty simple, according to John Lovell of the California Association of Health Underwriters.

“The way premiums are raised is age brackets of 5 or 10 years,” Lovell said. “I always talk to my clients in the year they’re going to get a rate increase. The amount it goes up is just a trend — I notify my clients so they’re not surprised. It cuts down on the rate shock.”

But California policymakers have a different kind of rate shock in mind. The shock of two rate hikes in a year.

“It’s bad enough to get a hike in health insurance rates,” Anthony Wright of Health Access California said. “It’s worse to not know when to expect them, and to get multiple hikes in a given year.”

The state legislature last week approved AB 2042 by Mike Feuer (D-Los Angeles), which would allow health insurers to raise rates only once a year.

According to Lovell, there are two kinds of rate hikes — a general increase to a wide range of the insured, and increases linked to age brackets. This law, he said, will prevent insurers from raising rates in an orderly and professional way.

“There should be an allowance for an age-rating increase, the year you have an age change coming.”

Bill author Feuer said it might be an administrative convenience for health plans and insurers, but it means more than that to consumers who can barely afford coverage.

“If health insurers begin to raise their rates multiple times per year when their subscribers aren’t expecting an increase,” Feuer said, “cash-strapped families could be forced to give up their coverage.”

The governor must accept or reject all bills from this legislative session before the end of September.

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