Insurance oversight advances but rate regulation stalls

August 30, 2010

By Daniel Weintraub

The Assembly on Monday approved legislation to toughen oversight of health insurance rate hikes but the Senate rejected, at least for now, a measure to require state approval before companies can increase their premiums.

The Assembly passed SB 1163, by Sen. Mark Leno, which would require insurers to get an independent review of proposed rate increases to determine if they are justified by the underlying costs of care. The bill would also require public disclosure of proposed rate increases and the reasons for them, and mandate that insurance companies give their customers 60 days notice before premiums rise.

The bill now goes to the Senate for final action.

The Senate, meanwhile, rejected AB 2578 by Assemblyman Dave Jones, which would have required insurers and health plans to get approval for rate increases from the Department of Insurance or the Department of Managed Health Care. The bill also would have required prior approval of changes in deductibles, co-payments or co-insurance.

The bill stalled on a 17-17 vote in the Senate, where it needed 21 votes for passage.

The regulation measure was supported by a broad array of consumer, labor and health groups, who argued that it was the major missing piece in the health care overhaul approved earlier this year by Congress and President Obama. But he bill was strenuously opposed by the insurance industry.

Blue Shield of California argued that regulating insurance rates would do little or nothing to control the factors driving the increase in overall health costs. Insurance accounts for about 13 percent of the health care dollar, the company said, while doctors, hospitals, pharmaceuticals, labs and other factors represent the biggest costs.

“Unless this bill becomes law, Californians will continue to be faced with excessive health insurance rate increases,” Jones, who is running for insurance commissioner, said in a statement released by his office. “California is powerless to stop the 20 percent rate hikes Anthem Blue Cross will impose on 800,000 policyholders starting October 1st or the additional rate increase they intend to impose early next year. Blue Shield will be raising premiums up to 29 percent for 250,000 of their California policyholders and the state does not have the authority to prevent these rate hikes.”

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