The California state assembly just took a major step to overhauling the way health insurance companies are regulated in the state, by passing AB 52, a bill to empower California's Insurance Commissioner and our Department of Managed Health Care to block premium increases for California health insurance consumers. In fact, it would require prior approval of regulators before rate increases can take effect. The efforts of the Obama administration under health reform to encourage just this type of action was not gone unnoticed by the bill's sponsor, Assemblymember Mike Feuer:
It's an extremely important piece of legislation not just here in California, but nationally. We know that the Obama administration, through its Secretary of HHS, Secretary Sebelius, has called for states accross the country to give their insurance commissioners the authority to regulate health insurance rates.Here's Assemblymember Feuer, making this statement to the press:
Last week, I wrote about Secretary Sebelius at the HHS issuing insurance company anti-gouging rate-review regulations. Rate review, while bringing sunlight as the best disinfectant, can be an even more important tool if state regulators are empowered to use the data from the review to block rate increases that are outrageous and unjust.
The need for such legislation has been highlighted in recent days by major newspapers in California. The Los Angeles Times penned a hard-hitting editorial in support of the bill and taking the insurance industry spin out for a good spanking:
At the end of April, for instance, Anthem Blue Cross raised rates for 120,000 customers an average of 16% despite a finding by the Department of Managed Health Care that the increase was unreasonable — and despite the company's agreement to roll back a similar increase for 600,000 customers whose policies were subject to Insurance Department oversight.[...]The passage of AB 52 today also highlighted the challenges of struggling against almost insurmountable insurance company opposition, as the body controlled 52-28 by Democrats, this bill garnered only 43 votes, barely enough to pass. One Democrat voted against it, and others did not vote. If you are in California, you can see here how your legislator voted. Displaying their deep disdain for their own constituents and unwavering loyalty to the health insurance industry, all Republicans walked out of the chamber in protest before the vote. California Insurance Commissioner Dave Jones, a former member of the state assembly who had worked hard on insurance regulatory reform during his time in the legislature celebrated the passage of the bill:
As it happens, California's health insurance lobby has tried to use New York's experience as Exhibit A for the case against prior approval. The association contends that five of the 10 states with the highest individual healthcare premiums are subject to prior approval, with New York leading the list. There's a problem with this claim, however: New York's prior-approval rules went into effect only this year. In other words, New York's high individual premiums are the result, if anything, of the absence of prior approval.
When I asked a CAHP spokeswoman where the figures came from, she said they conducted "some unique research." That's one way of putting it.
"I am pleased that the Assembly has passed this critically important legislation," Commissioner Jones said. "Since I took office, Californians have made it exceedingly clear that they want me to reject excessive rate increases, but I do not have this authority. AB 52 would give me the authority to reject excessive rate increases. As a member of the Assembly, I introduced this legislation three times and the need for it has only grown, as health insurance continues to become unaffordable for more and more Californians and businesses."The bill will still need to go through the California State Senate, and signed by Gov. Brown. I can't find a statement Brown has released one way or another, but I am confident he will sign it when it reaches his desk. If you live in California, please find and call your Senator and ask her or him to support this important legislation.
Now, insurance regulators in 30 states already have the authority, in theory, to block unjust rate increases. The fear of the insurance companies is about to come true, if California enacts this law. Through AB 52, though, the California legislature is poised to require - not merely enable - state regulators to block unjustified rate increases. In addition, AB 52 imposes civil penalties on insurance companies for screwing with the law, and make it a crime for insurance companies to violate the law wilfully. They will not only have to expose their fuzzy math, but also could be rejected rate hikes at will, and they can be held criminally liable in the worst cases. Worse yet for them, citizens of other states will want to do the same thing, and then the gravy train really slows down.
I know there are other states, like Oregon, are working on similar regulatory reforms, sparked both by the outrageous behavior of the insurers and the encouragement of the Obama administration. Vermont has recently enacted a single-payer law, to their great credit. When it comes to fully implementing and making a success out of health reform, states truly will be the laboratories and leaders to move us forward. If you care about health reform, get involved in your state - find out about efforts to shore up regulations, write to your legislators and your insurance commissioner. This is how change happens.