California bill urges more control over health insurance plans

Most insurers need governmental approval for rate-setting. A state legislator thinks health plans should as well.

By Robert Kazel, AMNews staff. May 19, 2003.

Arguing that there is no reason auto insurance rates should be regulated while health insurance premiums aren't, a state legislator in California has introduced a bill that would require health plans to get state approval before increasing rates, deductibles or co-payments.

Senate Bill 26, which warns that health insurance rates are soaring and businesses are increasingly deciding to drop employee coverage, is the first of its kind aiming to give a state veto power over all changes in health insurance charges, said Sen. Liz Figueroa, a Silicon Valley Democrat and chief backer of the measure.

The bill would require HMOs that want to change rates to first get agreement from the Dept. of Managed Health Care; PPOs would need an OK from the Dept. of Insurance. It also would force payers to make refunds to plan members if the state deems any rate increases enacted after the year 2000 were excessive. The criteria for deciding which changes were unwarranted are not yet written.

California businesses with 50 or fewer workers had premium increases of about 20% both last year and in 2001 and about 17% in 2000, according to the bill. The rates have been skyrocketing at the same time that health plans in the state generally have been enjoying hefty profits and maintaining unusually high levels of reserve funds, Figueroa said.

"We know they have massive cash reserves of $2.2 billion [collectively] above the levels established by the Dept. of Managed Care," she said.