By Daniel Weintraub
The state Assembly has passed legislation that would allow the state government to regulate health insurance rates for the first time, requiring insurers to seek and obtain prior approval before increasing premiums paid by consumers.
The bill, AB 2578 by Assemblyman Dave Jones, a Sacramento Democrat who is running for insurance commissioner, is one of the most controversial pieces of health policy legislation in the Capitol this year.
“This was a critical vote for consumers facing exorbitant health insurance premium increases,” Jones said in a statement issued by his office. “This bill will bring an end to outrageous health insurance rate hikes and fills a missing piece of federal health care reform. Without this legislation, insurers will continue to dramatically raise health insurance premiums, putting health insurance out of the reach of millions of Californians.”
Under the bill, HMOs and health plans would need approval from the Department of Managed Health Care (DMHC) or the Department of Insurance for proposed rate increases. The regulation would apply to premiums, co-payments and deductibles.
Although Jones contends that the legislation would dramatically slow the growth in health insurance costs, the bill would not prevent health insurers from passing on the cost of doctors, nursing, hospitals, lab tests, and prescription drugs. Health insurers would still be able to charge all of these costs to consumers while also earning a fair rate of return on their business.
For more information about the bill, see the legislature’s web site. Here is a link to the staff analysis at the time the bill came to the Assembly floor.