Private health plans push back against governor’s proposal

July 12, 2010

The managed health care industry is pushing back against Gov. Arnold Schwarzenegger’s proposal for more transparency and state oversight — but not regulation — of the premiums insurance companies charge their customers.

Patrick Johnston, a former Democratic legislator who is now president and CEO of the California Association of Health Plans, says the governor’s proposal would drive up administrative costs while doing nothing to reduce the underlying cost of health care.

While the association is relieved that Schwarzenegger continues to oppose the kind of full-fledged rate regulation backed by Democrats in the Legislature, Johnston said the group has “concerns” even about the governor’s more modest plan.

Schwarzenegger is calling for actuarial reviews of rate increase proposals to determine if they are in line with underlying costs. But Johnston said those studies are highly technical and would cost as much as $100,000 each. They would have to be done for hundreds of separate rate structures offered by the industry.

Johnston acknowledged that some sort of review is required as part of the federal health reform passed earlier this year. But he said the full actuarial studies were necessary only in cases where the government deems the rate increases “unreasonable.”

“An analysis of states with rate review reveals that regulating rates has no impact on premiums,” Johnston said in a statement released by his group. “It’s the unique make-up of the market in each state, along with state insurance rules that dictates price.”

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