The health insurance overhaul Congress passed requires insurance companies to spend 85 percent of their budgets on medical care. But the law doesn’t give anyone the authority to call out companies if they steeply raise their rates. A new bill aims to put a Band-Aid over that particular owie.
Sen. Dianne Feinstein says that in a decade, health insurance premiums have risen three times higher than the rate of inflation. Meanwhile, the five largest for-profit health insurance companies recorded a 16 percent profit this year over last. "So while profits and paychecks to the CEO have increased, the amount of money insurers paid out to actual health care went down. Something’s wrong with this picture."
Feinstein has introduced the Health Care Rate Review Act. It allows the federal Secretary of Health and Human Services to block or modify insurance premium hikes over 10 percent.
When Anthem Blue Cross proposed raising its health insurance premiums by nearly 40 percent, consumer advocate Harvey Rosenfield wasn’t surprised. Rosenfield says the same thing happened to auto insurance rates after the state legislature required all drivers to purchase car insurance. Now that federal health care reform requires everyone to carry health insurance by 2014, Rosenfield says insurance companies are at it again. He’s the author of the 1988 ballot measure Prop 103, which regulates auto insurance rates.
Before voters passed it, Rosenfield says, auto insurance companies had no incentive to become more efficient.
"The companies would just spend whatever they had to pay claims. They didn’t care about fraud. They didn’t care about waste or inefficiency. They just paid the claims and actually the more they paid, the bigger the markup they were able to put on it because the premiums were unregulated. Once Prop 103 passed, the formula went into effect that limits their profits and expenses and overhead and projections of future losses, and so on, the companies for the first time got serious about cracking down on fraud."
A similar bill sponsored by Democratic Assemblyman Mike Feuer in Sacramento would grant that authority to California’s insurance commissioner.