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California Moves To Control Health Insurance Rates

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CBS SF Bay (con't)

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SACRAMENTO (CBS / AP) — A California legislative committee on Wednesday narrowly approved a bill that would give state officials the power to reject proposed health insurance rate increases, but even some supporters said it will need major changes to survive.

The Senate Health Committee voted 5-3 along party lines to advance the bill, AB52, with Democrats in favor and Republicans opposed. It will go before another committee before coming to the full Senate.

The debate has implications across the United States. California regulations have national influence and the state, home to one in eight Americans, makes up 11 percent of the national market for those with health insurance through an employer and 15 percent of those with individual coverage.

Groups representing insurers, doctors and hospitals oppose the bill.

Backers include organized labor, advocates for low-income Californians and state Insurance Commissioner Dave Jones, a Democrat. Jones’ office would gain new leverage over health insurance rates if the bill passes and Gov. Jerry Brown, also a Democrat, signs it.

The bill faced an end-of-the-week deadline for committee approval, but its fate is uncertain. It has drawn no substantive Republican support and Democratic backing is wobbly amid strong lobbying by the politically influential opponents.

Health committee’s chairman, Sen. Ed Hernandez, D-Baldwin Park, pushed for significant changes to the bill before he would support it, but he voted for the measure Wednesday to keep it alive while negotiations over amendments continue.

“While I have had some concerns on your bill, I do support regulation,” Hernandez said.

He said he wants amendments to address concerns about political influence in decision making, whether outside parties could intervene in a rate case, identifying the medical costs that are built into insurance rates, and other matters before he will fully support the bill.

Sen. Tony Strickland, R-Thousand Oaks, called the bill deeply flawed and rattled off a list of concerns he had with the claims of backers.

He said insurers have been accused of gouging the public with high rates, but the companies have relatively low profit rates compared to pharmaceutical and medical device companies. Those medical cost drivers, he said, made a purely regulatory approach misguided.

“The author and sponsor have said much about this bill, but reality does not square with some of the rhetoric,” Strickland said.

By attempting to regulate rates without addressing use and cost of medical care, the bill would reduce the amount of care available to patients, Strickland said.

Jones said insurers can choose statistics that make their profits appear smaller, but by other measures the profit margins may top 20 percent.

“We remain concerned that the insurers will continue to push for poison-pill amendments,” Jones said outside the committee room. He and the bill’s author, Assemblyman Mike Feuer, praised Hernandez for his willingness to keep the bill alive while amendment talks continue.

“The bill matters,” said Feuer, D-Los Angeles. “People are choosing between paying the mortgage and paying for coverage.”

Other backers joined in the kudos for Hernandez, including The Greenlining Institute.

“California health insurance premiums have gone up at five times the overall inflation rate, bleeding consumers and small businesses dry,” said Carla Saporta, the group’s health program director.

A group representing insurers noted that the U.S. Department of Health and Human Service recently issued a letter saying California already has effective rate review, and that other insurance changes in the state should be allowed to work before lawmakers tinker any more.

“AB52 is unnecessary because existing state and federal laws already offer consumer protections,” said Patrick Johnston, president of the California Association of Health Plans.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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