Posts Tagged regulation

Insurance oversight advances but rate regulation stalls

Published: August 30, 2010 | No Comments

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.”

 

Private health plans push back against governor’s proposal

Published: July 12, 2010 | No Comments

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.”

 

Schwarzenegger proposes insurance rate review, but not regulation

Published: July 7, 2010 | 1 Comment

Gov. Arnold Schwarzenegger, who has opposed regulating the rates charged by health insurance companies, has submitted a proposal to the federal government for a state program to review and publicize rate increases before they go into effect.

The program, according to the governor’s administration, is in line with the federal health reform legislation approved by Congress and President Obama earlier this year. The state is seeking a $1 million grant to add staff and contracted services to the Departments of Insurance and Managed Health Care.

Most of the money would go for actuaries, who will be hired to review the insurance company rate increase proposals and to check to see that those rate increases reflect increases in the core cost of providing health care. Some of the money would also go for computers and software to help make the rate setting process more transparent. The state plans to post rate increase proposals on its web sites and provide easy-to-follow information on changes in the cost of physicians, hospitals and other health services.

Democrats in the Legislature have been pushing for full-fledged rate regulation, giving the state the power to approve or deny rate increases sought by insurance companies. But Schwarzenegger has opposed that idea in the past, and nothing in this grant proposal suggests that he has changed his mind.

Here is an excerpt from the proposal:

The availability of grant funding will enable the DMHC and the CDI to begin to develop a more robust rate oversight capability to ensure that consumers are confident that the rates they are paying for their health benefits are truly reflective of the underlying cost factors. Consumer confidence will be further enhanced by state legislation to provide cost data on underlying factors in a readily accessible format so that consumers are better informed about the costs of their health care and health care coverage choices. Further, these funds will allow both departments to better coordinate and integrate information gathering and rate oversight functions. Finally, the ability to purchase greater access to actuarial services will permit both departments to increase the level of sophistication with which they are able to fulfill their joint mission of consumer protection.

To read the whole thing, go here.

 

Health insurance regulation bill clears Assembly

Published: June 2, 2010 | 1 Comment

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.

 

The Blue Cross business model

Published: March 11, 2010 | No Comments

By Anthony Wright
Health Access

It’s true, as Jonathan Cohn points out, that the nation’s largest health insurer, Wellpoint, has been “among the most hostile to reform.” And as unearthed by Ezra Klein, at least one investment bank states the reason clearly: “Should health reform fail, Wellpoint would be a primary beneficiary.”

You may not know Wellpoint’s name, but even if you don’t live in California, you may have heard of their California subsidiary, Anthem Blue Cross. Their rate hikes have been repeatedly spotlighted by the White House, and have been the subject of over a half-dozen inquiries.

The scrutiny comes with the eye-popping rate hikes, and with being the biggest, both in the nation, and in many states like California. But the scrutiny should go beyond the rate hikes to their overall business practices—and the broken health system that rewards bad behavior. To reinforce Ezra Klein’s point, they have perfected a business model based on collecting premiums from the healthy and avoiding as much as possible actually providing coverage to those who are sick.

It starts with their aggressive denial of people with pre-existing conditions—we have many stories of people being denied not just in their 50s but in their 20s, and even for relatively minor issues like heartburn.

Most controversially, Anthem Blue Cross of California had the most number of rescissions in the state, the odious practice investigating patients after a major claim for the purpose of retroactively cancelling a patient’s coverage–even if they have paid months and months of premiums–if they found an inaccuracy on the patient’s application regarding their medical history. They created even more of an uproar when they sent letters asking doctors to turn their patients about unreported pre-existing conditions.

The company also works to ensure that mostly healthy people come to them in the first place. They specialize in cheaper, “bare-bones” plans with high-deductibles or that leave out key benefits. At a recent Congressional hearing, Chairman Henry Waxman of California grilled Wellpoint executives about why the biggest increases were going to more comprehensive plans, including those with maternity coverage, with an effort to shift people into plans where consumer face more financial risk. As the committee staff report indicates:

“Internal documents suggest that WellPoint’s business plan includes moving consumers into less generous plans. This strategy appears to have three components. First, WellPoint’s highest rate increases seem to apply to their most comprehensive insurance plans. Maternity care is a marker for a more comprehensive package of benefits. A chart of proposed rates shows that WellPoint’s highest rate increases apply to the only two product families regulated by the Department of Insurance with maternity coverage. The chart also shows that for the most part, WellPoint proposed lower increases within specific product lines for the versions with higher deductibles than for the versions with lower deductibles.”

Anthem uses benefit design, but also marketing, to avoid older folks and get more than its fair share of young and healthy people—also called “cherry-picking.” A classic example is a product like “Tonik,” which is marketed to 19 to 29 year olds, and has higher cost-sharing and omits maternity coverage—the most likely need for coverage for young women. It was perhaps the only insurance product that has been mocked by The Daily Show.

With this and other strategies, the company has been able to send over $525 million from California policyholders to Wellpoint’s Indiana headquarters in just 2009. Wellpoint got over $4.2 billion in earnings since acquiring Anthem in 2004, according to reporting by Lisa Girion of the LA Times. This is despite an agreement with state regulators that the merger would not siphon California policyholder dollars to the out-of-state . Anthem Blue Cross waited out the three years of the agreement, and sent $950 million to the corporate parent the week after.

These practices, yielding these dollars, are why the company has been on the front lines of opposing health reform.

When Governor Schwarzenegger proposed health reform in California in 2007, other insurers were willing (with caveats) to consider living by new rules, like guaranteed issue. As the biggest player in the market, Anthem Blue Cross of California stood alone apart, investing $2 million in an opposition campaign. (My organization and others launched a counter campaign, www.sickofbluecross.com, which continues today).

In the current federal debate just a few months ago, Anthem Blue Cross took the unusual step of sending misleading E-mails to their subscribers attacking the House health reform bill.

Other insurers have been ambivalent about health reform, which would mean more potential customers–but that includes sicker patients that they would rather not take, and more accountability and oversight over their operations. Health reform would mean a profound transformation for the industry: insurers competing on cost, quality, and customer service, rather than risk selection and avoiding sick people.

Anthem Blue Cross of California, and its parent company Wellpoint, has internalized the perverse and inequitable incentives of the current, broken individual insurance market: it thrives and profits from the status quo. The only surprise in the investment bank’s analysis that Wellpoint would be a primary beneficiary of reform failing was that it was stated so clearly.


Anthony Wright is Executive Director of Health Access California, a statewide health care consumer advocacy coalition of over 200 groups. This article has been re-published from the Health Access Blog.

 

Assembly panel presses health regulators for answers

Published: March 10, 2010 | No Comments

A bipartisan majority on an Assembly committee that oversees the state bureaucracy is turning up the heat on California’s insurance and health plan regulators to explain what they’ve done to help people who have been kicked off their insurance coverage after filing claims. The members of the Assembly committee on Accountability and Administrative Review also want the departments to do more to make sure that a recent drop in the number of coverage rescissions is not temporary.

The hearing looked into what has happened since the state took well publicized action against several companies for wrongfully terminating their customers. Some customers lost their coverage after filing claims for the treatment of serious diseases, only to learn that their insurer accused them of misrepresenting their health condition or providing incorrect information about themselves.

After hearing testimony from industry critics and department officials, the committee voted to ask for full reports on the issue from the departments of Insurance and Managed Health Care. There was also bipartisan support for a request that the Department of Managed Health Care require all five major health plans in California to offer an independent review to anyone whose coverage is terminated after they have been enrolled and have been paying premiums. Finally, the committee members will ask the managed care regulator to adopt formal regulations governing rescissions rather than relying on settlement agreements reached separately with each of the health plans.

There also seemed to be bipartisan backing for the idea of asking the departments to use tax or employment records to track down each of more than 6,000 people whose coverage was rescinded before the state started cracking down on the practice in recent years. Settlements with the companies require a variety of actions to help those consumers, from restoring their coverage to reimbursing them for lost costs, but only a handful of the 6,000 have taken advantage of those benefits. State officials said they did not know why that was the case, and the committee pressed them to find out more.

Both departments, meanwhile, said the number of rescissions has plummeted to almost nothing since the crackdown began. In 2008 and 2009, according to the Department of Managed Health Care, the health plans reported only 9 rescissions. The Department of Insurance, which regulates a different set of plans, said they believe the numbers were similar among plans they regulate but did not have the official numbers.

–Daniel Weintraub

Note: An earlier version of this item incorrectly reported the number rescissions in 2008 and 09.

 

AB 2578: Insurance regulation

Published: March 1, 2010 | No Comments

Bill: AB 2578, by Assemblyman Dave Jones

Topic: Regulating health insurance rates

Summary: Requires approval by the Department of Managed Health Care or the Department of Insurance of an increase in the amount of the premium, copayment, co-insurance obligation, deductible, and other charges under a health care service plan or health insurance policy.
Status: Introduced in the Assembly.

Full committee analysis: None on file. Click here for full text of the bill.

To see other legislation we’re tracking, click here.
 

State rule can’t control health care costs

Published: February 15, 2010 | Comments (5)

State regulators, including Insurance Commissioner (and gubernatorial candidate) Steve Poizner, are hyping their deal with Anthem Blue Cross to postpone a big planned health insurance rate increase until at least May 1. But the controversy over the rate hike might in the end demonstrate how little power state officials have to control health care inflation. And the tool Poizner is using — the so-called medical loss ratio — is not only weak but might be counter-productive.

The medical loss ratio rule, in California, requires health plans to spend at least 70 percent of every premium dollar on medical care. A similar rule that’s being considered as part of federal health reform would peg the ratio at 85 percent. Many consumer advocates support these measures because they see them as putting more of the premium dollar into care and less into administration, marketing and profits. That may be true, if you police the definitions tightly enough. But it’s not clear that these rules also limit the growth in health care costs.

All that insurers have to do to meet the 70 percent requirement is increase the amount they pay for doctor visits, drugs, hospital stays and lab tests. They still pocket their percentage as profit on those higher costs. In fact, the higher their costs, the higher their profit. If their total costs are $1 billion, they get to keep $300 million for administrative costs and profits. If their costs rise to $1.5 billion, they get to keep $450 million for their own purposes. The more they pay out, in other words, the more they stand to make.

Many policy makers don’t seem to understand this relationship. US Health and Human Services Secretary Kathleen Sebelius said last week that it was “difficult to understand” how premium increases of the size Anthem was proposing can be justified when the firm’s parent company reported a $4.75 billion profit in the last quarter of 2009. But since the higher their costs are, the more they get to keep in profits, it ought to be very easy to understand.

Free-marketers might say the insurers shouldn’t have to justify their rates at all. And in a competitive market, they wouldn’t be free to raise those rates, because competitors would undercut them for the business. But those who support regulation might want to re-examine rules that require insurers to spend a certain amount of their premium on medical care. Those rules may not be accomplishing their desired effect, and could actually be making matters worse. Here is an AP story on the decision.

 
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