You are browsing the archive for Rate Regulation.

Lessons From The Cancellation Crisis

12:53 pm in Uncategorized by Consumer Watchdog

Jamie CourtAn analysis just released by California’s health insurance exchange, Covered California, offers the first real insight into the depth of the Obamacare cancellation crisis.

About 450,000 of the 900,000 cancelled California policyholders will see rate hikes, according to the analysis released by Covered California. That’s 50% of all cancelled Californians who will be paying more.

Most strikingly, half of those cancelled policyholders are getting policies that are little different from the ones cancelled, deemed by Covered California “comparable policies. ” In other words, half of cancelled California policyholders are paying more, in some cases a lot more, for policies that are worth no more under the Affordable Care Act. Covered California reports the other half – 225,000 — will pay more for better benefits since they had “Thinner Plan.”

Despite the ugly stats, the Covered California’s board of political appointees voted to block President Obama’s call for extending cancellations for another year. The Covered California contracts with health insurance companies, written at the insurers’ request, required them to cancel the 900,000 Californians. Thursday the board of political appointees refused to reverse course, arguing that would create more problems.

The happier headline Friday that 360,000 Californians have applied for coverage with California Covered is little surprise given that 900,000 policyholders have nowhere else to go because of its actions. And that was the point of the cancellations – drive the individual policyholders into Covered California’s pool.

The problem is that pool has premiums that are much higher than what they should be and doctor and hospital networks that are much too small. Cancelled policyholders would care less if they had comparable prices and comparable benefits. And that’s what reformers should be fixing, rather than defending as reasonable.

35 states have rate regulation but not California. So benefits and premiums will continue to be out of whack until voters set the insurance industry and its political allies straight through a ballot measure next November, which requires approval by the elected insurance commissioner for rate hikes and benefit changes.

Cancelled Plans

The Covered California analysis shows that 35% of cancelled policyholders will get subsidies for policies, so they will get rate relief under the Act. That doesn’t mean taxpayers aren’t paying too much for those policies, only that low income consumers are getting help.

The analysis, by one of the biggest boosters of the ACA, discredits an argument among other boosters that is troubling: why do we care that cancelled policyholders are losing ‘junk insurance.”

Our consumer group supported the ACA, and its research and education inspired its bans on junk insurance, preexisting condition limitations and medical underwriting. The fact is, however, that cancelled policies in California are, by and large, not junk. Their physician and hospital networks under old policies are far broader than under the Covered California plans. Of course, no one is watching, since our insurance commissioner has no power over prices.

Rate regulation is one answer, but until the 2014 election, when California voters can make that change, backers of the ACA also have to stop insisting its policies are always better, even if they cost more and cause doctor dislocation. That just won’t fly with a public that knows far better. Californians know when their doctors are not in the networks in the new plans and their premiums are higher.

If we want to save the ACA, then we better make it work. That includes acknowledging its flaws and trying to make them better.

In a state like California, without rate regulation and with much ACA support, it’s unthinkable that Covered California would buck the president and California Insurance Commissioner Dave Jones’ call for a reprieve on cancellations when its own numbers show 450,000 are paying more under the ACA.

It’s the continuation of a troubling logic that you are either for the ACA, and the relief it extends to 48 million uninsured, or against it. That type of reasoning will alienate the middle class, which is largely without subsidies and facing a real crisis in cost in states like California. These policyholders need relief too. And that means bucking the insurance industry, something its business partners at Covered California seem completely unwilling to do.

If the most ardent backers of the ACA don’t start to think like average citizens, there’s little reason to believe the vital center and muddled middle will continue to support the ACA. It’s time to wake up and smell the rate hikes and insurance company shenanigans for what they are – wrong, plain and simple. Then we can work together on fixing them.


Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

A California-Style Fix for Obamacare’s Runaway Premiums

12:28 pm in Uncategorized by Consumer Watchdog

 photo Harvey_3_zps8d2a495e.jpgRegulation of insurance companies, introduced by Proposition 103, could repair a loophole in the Affordable Care Act.

“We didn’t do a good enough job in terms of how we crafted the law,” an apologetic President Obama said this month, shortly after millions of Americans got notices from their health insurance companies that their current policies were going to be canceled because the policies didn’t comply with the minimum standards of the Affordable Care Act. Worse, the federal website where people were supposed to be able to buy replacement coverage was still barely functional.

Last week, confronting a perfect storm of policy snafus and public indignation, the president announced that he would allow health insurers to renew current policies for an additional year. But he left the final decision to the companies or state authorities, who promptly warned that the result would be higher premiums.

That, not the cancellations or the HealthCare.gov website, is the fundamental problem with the Affordable Care Act: The law places no limits on the price insurance companies can charge for the coverage we are required to buy. This was no drafting error. In 2010, neither Congress nor the White House wanted to risk the opposition of the powerful insurance industry.

Thus it’s no surprise that the insurers are now jacking up premiums and copays while limiting prescription drug benefits and dumping doctors and hospitals from their networks.

California lawmakers made a similar egregious error in 1984 when they passed a law requiring residents to buy automobile insurance but failed to regulate prices. So, of course, the insurance companies took advantage, imposing double- or triple-digit premium increases. A voter revolt ensued.

And therein lies the solution to the current healthcare law debacle.

Twenty-five years ago this month, angry California voters passed a ballot measure to stringently control automobile, as well as home and business, insurance premiums. An unprecedented $63-million campaign by the insurance industry could not stop the grass-roots rebellion. In a historic upset, Proposition 103 swept away decades of deregulation, discriminatory practices and barriers to competition in the insurance marketplace.

Insurance companies were required to open their books and publicly justify rate increases before they took effect. To guarantee that industry lawyers and lobbyists would not derail the new law, the measure made the insurance commissioner an elected post and further empowered consumers to hold insurance companies directly accountable if they violated the law.

The voters also enacted critical protections against any last-minute chicanery by insurance companies before implementation of their reforms. For example, to prevent opportunistic price-gouging before Proposition 103 went into effect, the law imposed a one-year postelection freeze on rate increases, plus a 20% across-the-board premium rollback. It also barred insurance companies from arbitrarily canceling or refusing to renew auto policies. These safeguards, missing from the Affordable Care Act, made the transition from deregulation to price protections a smooth one. And it netted Californians $1.2 billion in refunds for unjustified price increases.

A study issued last week by the Washington-based Consumer Federation of America quantifies Proposition 103′s pocketbook impact. It found that California is the only state in the nation where the average auto insurance premium is lower today than it was in 1989. Once the second-most expensive state for auto insurance in the nation, California now ranks 30th, according to the report. The federation also found that California motorists have saved more than $100 billion since 1989, an average annual savings of more than $8,000 for every household in the state. The report concludes that under Proposition 103, “California has provided auto insurance consumers the most effective and protective regulatory system” in the United States.

Equally important is the initiative’s democratic impact. Proposition 103′s mandate for fairness in insurance pricing practices has become ingrained in California’s public policy. The measure built a strong political base by giving both middle-class and low-income voters an equal stake in its reforms. And its success has enhanced public confidence in state government and in regulation.

That’s a stark contrast to Obamacare, at least so far. The Affordable Care Act offers subsidies to low-income consumers — a valuable investment by taxpayers in America’s human infrastructure — but the absence of price protections has deeply disturbed a middle class abandoned by Washington after the 2008 economic collapse and still struggling to pay the bills.

Proposition 103 did not originally apply to health insurance, unfortunately. To remedy that, Consumer Watchdog has qualified an initiative for the November 2014 ballot that would place health insurance companies doing business in California under Proposition 103′s regulatory controls. The nation will be watching as California voters once again lead the way in insurance reform, this time with a state-based strategy to close the loophole in the Affordable Care Act.

Harvey Rosenfield, founder of Consumer Watchdog, is the author of Proposition 103. Originally published in the Los Angeles Times on Tuesday, November 19, 2013. Online version can be viewed here.

$100 Billion Win

2:26 pm in Uncategorized by Consumer Watchdog

Prop 103 100 Billion SavedI’m truly humbled.

It was a big deal when, 25 years ago this month, you and other California voters joined with me to pass Proposition 103, the toughest auto insurance regulation in the nation. But I had no idea exactly how big.

Today, in downtown Los Angeles, the Consumer Federation of America released the findings of a new report: Prop 103 has saved California drivers over $100 billion dollars since 1988. That’s about $8,125 per California household. In fact, California is the only state in the country where auto insurance rates actually went down over the last 25 years.

Back in 1984, the California Legislature passed a law requiring drivers to have auto insurance…but didn’t limit how much insurers could charge. Predictably, insurers hiked prices by double digits. Voters revolted against the price gouging by passing Prop 103, and the result was billions in savings.

Now, the federal health reform law is requiring everyone to buy health insurance. But Obamacare doesn’t limit what insurers can charge. It’s déjà vu all over again. Not surprisingly, insurance companies are hiking prices by double digits.

We Californians have been through this before, and with your help we’ll revolt again next year. Consumer Watchdog has put an initiative on the November 2014 ballot that will apply Prop 103′s money saving reforms to health insurance companies. Health insurers will have to open their books and justify any rate increase before it takes effect.

Harvey Rosenfield

This will be another David v Goliath battle like the one we won together twenty-five years ago.

Auto insurance in California is a $20 billion a year industry. Health insurance is more than a trillion. Imagine the savings we’ll be celebrating 26 years from now once voters regulate the health insurance industry at the ballot next year.

Thanks for all of your support.

Posted by Harvey Rosenfield – Founder of Consumer Watchdog and author of Proposition 103. For more on Consumer Watchdog and Prop 103 visit our website.

Health Law Doesn’t Protect Californians From Rate Increases

2:47 pm in Uncategorized by Consumer Watchdog

Photobucket

Reporters largely missed the point of a Commonwealth Fund study released this week, that looked at consumer savings under Obamacare’s 80-20 rule, the rule making insurance companies spend at least 80% of your premiums on health care, not overhead.

The authors started with a fact we already knew — that health insurance companies had to pay $1.1 billion in rebates for missing the MLR requirement in 2011 — and that big shiny number distracted the news media. But the authors zeroed in on a much more important fact. Insurance companies successfully reduced administrative costs by $1.184 billion in 2011, but they used those savings to increase profits instead of passing them on to consumers.

Clearly the 80-20 rule isn’t working to contain profits and hold down premiums, especially in states that don’t have tough regulation of insurance premiums.

California Insurance Commissioner Dave Jones launched an audit this week of the state’s largest health insurers to determine if consumers paid too much when insurers were actually saving money and boosting profits. The Commonwealth study found that in California, insurance companies increased profits for individual plans by $88 per member or about $90 million, even though administrative costs went down and every major insurance company imposed rate increases.

These results are more evidence that states need the ability to say no to rate manipulation. Otherwise, insurance companies will keep premiums artificially high to make sure profit numbers stay high too. As we warned HHS Secretary Sebelius more than two years ago:

“In the same way that a Hollywood agent who gets a 20 percent cut of an actor’s salary has an incentive to seek the highest salary, insurers will have incentive to increase health care costs and raise premiums so that their 15 percent or 20 percent cut is a larger dollar amount.”

As Jones said when announcing the audit:

“I have long pushed for the authority to reject excessive health insurance rate increases and this study provides further evidence of why this change in the law is long overdue in California. Health insurers and HMOs continue to impose double-digit premium increases each year and are making larger profits when selling to individuals and families even during these tough economic times.”

Californians will finally have the chance to stop them, by voting at the next ballot on an initiative measure to require health insurance companies to publicly justify rate increases and get approval before they take effect. Learn more at justifyrates.org
______________________________________________________________
Posted by Carmen Balber, Washington DC Director for Consumer Watchdog and Consumer Watchdog Campaign

Mandatory Health Insurance Needs Rate Regulation As Next Step To Make Coverage Affordable

2:28 pm in Uncategorized by Consumer Watchdog

Decision Upholds Key Protections Requiring Insurance Companies To Sell and Price Insurance Regardless of Health Status

Supreme Court after HCR decision

Today’s decision by the United States Supreme Court to uphold the Affordable Care Act and its mandate that individuals purchase health insurance makes rate regulation the next essential phase of health reform, said Consumer Watchdog today.

Consumer Watchdog praised the court for requiring health insurance companies to sell to people regardless of pre-existing conditions, eliminating medical underwriting, and barring practices like rescission that made health insurance disappear when patients needed it most. These reforms will expand Americans’ access to health insurance and help policyholders get the coverage they are promised, said Consumer Watchdog.

“Upholding the individual mandate makes rate regulation the next essential phase of health reform and we hope the President will join in helping us to keep premiums low now that people are going to be taxed for not having health insurance,” said Jamie Court, president of Consumer Watchdog. “We must ensure health insurance premiums are affordable if Americans are going to have to buy it. The future of health care reform depends on regulating premiums and making health insurance more transparent and accountable.”

Consumer Watchdog’s campaign affiliate, Consumer Watchdog Campaign, is sponsoring a ballot initiative to force health insurance companies to justify rate increases and get approval before they take effect. The ballot initiative is awaiting certification for the ballot. More on the ballot measure at: http://www.JustifyRates.org.

A Consumer Watchdog report finds that strong rate regulation is necessary to hold down costs and keep insurance affordable under health reform. The report examined Massachusetts where rate regulation has begun to successfully hold down premiums after the state’s individual mandate, which was the model for federal reform, failed to control costs.

Download the report “Health Reform and Insurance Regulation: Can’t Have One Without The Other”

Blue Shield Hikes Rates, Disses Insurance Commissioner in California

11:45 am in Uncategorized by Consumer Watchdog

After Blue Shield shocked the nation with 59% premium hikes in California last week, the company just refused a request from the elected insurance commissioner to stop the increases for 60 days. 

Blue Shield is making the case for tough premium regulation, because is has proven that it has the power to raise rates as much as it wants at will and refuse even a modest request from the elected insurance commissioner.

After spending the day walking the halls at the state Capitol in Sacramento yesterday, I can tell you Blue Shield made a big mistake when it decided to price gouge its customers. The state legislature is ready for a fight to give the insurance commissioner power to approve or to deny health insurance premium increases before they take effect. (You can help give them the push they need by sending an email to your state representatives today.) If that fight fails, Consumer Watchdog will help the voters decide through a ballot measure whether government should have the power to regulate and roll back excessive premiums.

Blue Shield made an offer in an errant press release it later recalled which no regulator or policyholder can accept. The company said it would let an independent actuary decide rate justification, and decided to live by the policy when news broke.  The problem is that in the absence of legislated standards for what is an excessive premium, an independent actuary has no basis for review of the premium's reasonableness other than whether there is an error in addition, multiplication or subtraction.

Questions abound about how Blue Shield can justify its 59% premium hike other than by the means it seeks — an actuary to say all the math is good. The standard Californians deserve is that the rates are not excessive or discriminatory. That's the standard for the prior approval of auto and homeowner insurance rates in California that are rejected or accepted by our elected insurance commissioner. The standard saved drivers $62 billion on their auto insurance according to the Consumer Federation of America.

Blue Shield is more opaque than any health insurance company in California because of its unique tax status. We don't know how much the CEO makes, nor can we adequately see the company's the books since it is neither publicly traded nor a tax exempt charity that must make its tax returns public.  Suspicion is Blue Shield cooked its books, and hid big sums of money, to justify the 59% increase.

Only subpoenas and special investigative hearings will determine the truth in the absence of new authority given to the elected insurance commissioner Dave Jones. Legislation by Assembly Member Feuer will give the commissioner that power and it is precisely what Blue Shield's second PR problem in two weeks sought to derail.  Once again, Blue Shield has made the case for exactly the tough regulation it seeks to stop.

————————

Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.