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Rate Regulation for Health Insurance: Biden, Obama Administration Should Look to CA's Model Law Which Has Saved Drivers $62 Billion Since 1988

WASHINGTON, Sept. 22 /PRNewswire-USNewswire/ -- The consumer group that pioneered the most successful insurance premium regulation law in the nation, California's Proposition 103, today said only the extension of such "prior approval" regulation to health insurance can begin to make insurance affordable in the wake of double digit premium increases that have dramatically out paced wages. Under the proposals in Congress, Americans who do not purchase insurance policies would pay thousands of dollars in penalties.

Today Vice President Joe Biden will speak at the National Association of Insurance Commissioners' annual conference about rate regulation, a process that allows State Insurance Commissioners to review rate increases levied by insurance companies.

Consumer Watchdog has repeatedly called on the Obama Administration and Congress to adopt California's insurance rate regulation that requires prior approval of rate increases, allowing an elected insurance commissioner to reject rates deemed excessive, inadequate, or unfairly discriminatory. Unlike other rate regulation, "prior approval" allows an insurance commissioner to review and reject rates before they are passed on to the consumer.

California's Proposition 103 prior approval rate regulation has saved drivers in California $62 billion on auto insurance rates since 1988, and similar savings would be expected for health insurance rates. Since 2003, Consumer Watchdog has saved $1.7 billion by challenging unnecessary premium increases using Proposition 103's public intervention process.

"California's prior approval rate regulation is the nation's most successful insurance regulation and is a model for health insurance reform. Prior approval is a time tested and successful tool to restrain rampant insurance company profiteering and waste," said Jerry Flanagan, health policy director of Consumer Watchdog. "If Government is going to require Americans to buy health insurance policies, government has the responsibility of ensuring that insurance is affordable."

Best in the nation: A 2008 Consumer Federation of America report found Proposition 103 to be the most effective insurance regulation in the country and detailed the savings of the California law. The report can be downloaded at: A related press release is available at:

The components of California's landmark property and casualty insurance regulation law, Proposition 103, include:

** A prior approval system for rates requiring insurers to seek permission from government regulators and justify rate increases -- excessive, inadequate, and unfairly discriminatory rates are banned. Since 1988, California's Proposition 103 has saved drivers $62 billion while fostering a competitive and still profitable insurance market.

** An intervenor system that allows the public to challenge unnecessary premium hikes. Proposition 103 grants consumer representatives the right to petition for a formal public hearing on any rate increase. If an insurer seeks a rate change of more than 7% for personal insurance policies or 15% for commercial lines the Insurance Commissioner must hold a public hearing.

** An elected state-level commissioner accountable to the public directly for premium hikes. To ensure that the reforms would be properly enforced, Proposition 103 made the state insurance commissioner an elected position accountable directly to the voters, not a political appointee.

Download Consumer Watchdog's report, Regulation, Not Deregulation: The Prescription for Lowering Health Costs Without Cutting Coverage (With or Without a Public Option), at:

Baucus Proposal

The new health reform plan released last week by U.S. Senate Finance Committee Chairman Max Baucus (D-MT) will charge middle-class families nearly 20% of their annual income for health coverage, while letting insurance companies charge what they please for policies, said Consumer Watchdog.

Prior approval regulation would control the startling health premium and out-of-pocket rates under the Baucus proposal illustrated in a chart leaked from the Senate Finance Committee, showing yearly average out of pocket costs of $15,300 for a family of four making $78,000.

Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at:

SOURCE Consumer Watchdog
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