California Insurance Regulators Want Authority to Reject Rate Increases

A bill was advanced on Tuesday by California legislators hoping to give regulators the authority to reject excessive rate increases proposed in health insurance policies. While disagreements ensued between legislators, mostly along party lines, the bill eventually received the 12 votes needed to move it out of the assembly health committee.

Regulators Want the Right to Reject Rate Increases

Health insurance companies have been known for attempting to impose high rate hikes on their customers. This has occurred most recently with Blue Shield of California, which threatened to increase rates by as much as 59 percent.

While regulators were not happy with the increase Blue Shield and other companies have proposed, the most they could do was ask the companies to hold off on rate hikes until Insurance Commissioner Dave Jones had an opportunity to review them and ensure they were not spending less than 70 percent of their premiums on health care expenses.

If they followed this guideline, companies could increase rates as high and often as they like.

Regulators want more power in governing this area, which is why Democratic Assemblyman Mike Feuer of Los Angeles introduced his bill to the Assembly Health Committee. If it passes in Congress, California would join 35 other states that currently have the right to reject rate hikes.

Calif. Insurance Customers Pay Near Highest Rates in the Nation

Commissioner Jones said at the committee hearing on Tuesday that California policyholders pay some of the highest insurance rates in the country. Since regulators’ hands are tied when it comes to controlling the rates, companies can continue to impose hikes without explanation.

He noted those who suffer the most are people holding individual health insurance policies since they have faced the biggest rate hikes in recent years. Even worse, Feuer and several fellow Democrats say that the hikes are not being used to pay for an increase in health costs, but are instead adding to the companies’ profits.

Charles Bacchi, the California Association of Health Plans Executive Vice President, opposed the bill on behalf of health insurance companies, stating that medical costs would require a $40 million bureaucracy to execute its intentions. However, Jones said the top five insurers alone in California collectively received more than $11 billion in profits last year and therefore must be more closely governed.