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Insurance Commissioner: Health Care Rate Increases Unlikely To Stop

Emily Bazar |
February 6, 2011 | 12:49 a.m. PST


From the day he was sworn in as California’s new insurance commissioner, Dave Jones has come out swinging.

His primary target? Health insurers.

Jones, a former Sacramento city councilman and state assemblyman, now runs the Department of Insurance, which regulates most PPO plans. (The Department of Managed Health Care primarily regulates HMOs.)

On inauguration day last month, Jones immediately called for an emergency regulation giving him the authority to enforce a provision of the federal health care overhaul requiring health insurers to spend at least 80 percent of premium dollars on medical services. The regulation now is in effect.

Since then, he has asked four major health insurers to delay planned rate hikes by 60 days to give him more time to review their proposals. Among them is Blue Shield of California, which proposed a series of increases that totaled as much as 59 percent for some consumers.

All of the insurers eventually agreed to the delay.

But Jones’ authority to regulate rates is limited. As assemblyman, he tried and failed to pass a law giving the insurance commissioner the ability to reject excessive rate hikes. A similar measure has again been introduced in the Legislature.

We asked Jones to discuss his goals and challenges.
Q: What will be your primary health insurance initiatives? Identify one or two goals.
A: Implementation of health care reform is one of my top priorities. In addition, we need to build on that reform to address certain omissions, for example, the absence of authority in the federal Affordable Care Act to reject excessive premium hikes. I’m going to continue to work on giving the insurance commissioner the authority to reject excessive health insurance premium increases much as we have for car insurance, home insurance and property and casualty insurance.
Q: Why do we have it for those types of insurance and not for health insurance?
A: There really is no difference. Health insurance is every bit as important as car insurance and homeowner’s insurance.  However, in 1988, when the voters enacted Proposition 103, which gives the insurance commissioner the authority to reject excessive premium hikes for auto, property and casualty insurance, health insurance was left out. We’ve had 10, 20, 30, 40, 50 percent rate hikes year after year and they are unsustainable for Californians and for California businesses.
Q: Are health insurance rates too high in California?
A: There’s no question in my mind that the level of health insurance rates and premiums is a big factor in why we have close to 6 million Californians who cannot afford insurance. We are still climbing out of the worst recession in the state and nation’s history and we continue to have record unemployment. But even before the recession, we had high levels of uninsured because the rates are too high for people and for small businesses to afford the insurance.
Q: What happens during the 60-day delay insurers have agreed to?
A: We will closely review the rate filings to make sure they are mathematically accurate, that they are actuarially sound and review them to determine whether they are reasonable or not (under a new state law).
But I don’t have the authority, even if I conclude they’re unreasonable, to reject the rate hikes. So I don’t want to leave the misimpression among Californians or California’s policyholders that these rate hikes are not going to ultimately occur. People need to understand that in all likelihood, these rate increases will go into effect because the law does not give me the authority to turn them down based on excessivity.
Q: What tools can you use to challenge insurers who are proposing stiff rate hikes?
A: One thing we’ll be doing is reviewing these rate filings for compliance with the new medical loss ratio that was established in the federal Affordable Care Act. It requires that 80 cents on every premium dollar go to actual health care to pay for physicians and hospitals and other medical providers, and limits the amount of profit and overhead to 20 cents on the dollar.
Q: What happens if you find plans that don’t comply with the 80 percent medical loss ratio?
A: The federal government has the authority to order rebates (to policyholders) and under state law, I can reject the policy that underlies the rate filing. So, we believe in those cases where we determine they are not compliant with the 80 percent medical loss ratio, we’ll be able to get them to comply.
Q: What happens if Congress scales back or repeals the health care overhaul? Where does that leave California?
A: There is a significant consensus in California about moving forward. That was reflected in the bipartisan support for legislation last year that was signed by a Republican governor to establish the health insurance exchange authority under the federal Affordable Care Act.
I don’t believe that the new House Republican leadership will be successful in moving forward repeal legislation but there is some risk that the House leadership will be successful in defunding elements of reform. We should continue moving forward here in California as best we can.
We here in California, as we often do, have an opportunity to be a national leader in implementation of this act. The act has a lot of benefits for Californians and California businesses and we’ve made a decision to move forward collectively.
Emily Bazar is a senior writer at the California HealthCare Foundation Center for Health Reporting, an independent news organization that reports on health care issues of importance to Californians.  It is based at the USC Annenberg School for Communication & Journalism and funded by the nonpartisan California HealthCare Foundation.



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