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Rate Regulation for Health Insurance: Obama Administration Should Look to CA's Model Law Which Has Saved Drivers $62 Billion Since 1988
Date:2/22/2010

WASHINGTON, Feb. 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.

Today, President Obama is expected to announce a health insurance premium rate regulation proposal in the wake of Anthem Blue Cross's recently announced 39% rate hike. Anthem Blue Cross is the California subsidiary of the nation's largest insurer, WellPoint Inc.

The President's proposal would create a Health Insurance Rate Authority which will "provide needed oversight at the Federal level and help States determine how rate review will be enforced and monitor insurance market behavior." Furthermore, "if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable." However, the proposal outline does not provide detail of whether the review would occur before the rate increase is mailed to consumers or what facts would be considered to determine if the rate is "unreasonable and unjustified."

Consumer Watchdog has 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 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 model to restrain rampant insurance company profiteering and waste," said Jerry Flanagan, health policy director of Consumer Watchdog.

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.

Best in the nation: A 2008 Consumer Federation of America 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:

http://www.consumerfed.org/elements/www.consumerfed.org/file/finance/state_auto_insurance_report.pdf.

A related press release is available at: http://www.consumerwatchdog.org/insurance/articles/?storyId=19888.

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.

For more information about the landmark California health insurance law go to: http://www.consumerwatchdog.org/insurance/

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

http://www.ConsumerWatchdog.org/resources/Regulate_Not_Deregulate.pdf

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

SOURCE Consumer Watchdog

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SOURCE Consumer Watchdog
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