California regulates auto insurance rates under Proposition 103, which is credited with saving customers billions of dollars. So should we do the same for health insurance? That's the question in Sacramento, where a big hearing is scheduled for Thursday.
If you drive a car in California, you must have auto insurance -- the law demands it. And because of that, at least in part, California regulators control your rates. Soon, you'll be required by federal law to carry health insurance too. However, California regulators cannot control health insurance rates, they can only give their opinion about them.
Now a bill in Sacramento would let regulators for the very first time approve or reject health insurance rates.
"We have a new federal law that says health insurance companies are going to sell products that we all have to buy in 2014, so it only makes sense that government needs to make sure these health insurance policies are affordable," said Jamie Court from the Consumer Watchdog group.
"Talking about rate regulation when really all the insurance costs are 15 to 20 percent, really is a distraction and an expensive distraction," said Patrick Johnston from the California Association of Health Plans.
Court and Johnston argue on opposite sides of Assembly Bill 52. Here's what that bill would do: under current law, insurance companies are required to notify state regulators and justify any rate increases. The regulators can declare a rate hike "unreasonable," but they can do nothing to stop it. Under AB 52, state regulators would be authorized to "approve, deny or modify" rate changes.
Anthem Blue Cross and Blue Shield of California came under fire last year for proposing double-digit rate hikes. Anthem raised individual premiums an average of 16 percent in May, even though regulators called it "unreasonable". Blue Shield backed down after public outcry over its plan to raise rates as much as 59 percent.
"Without giving the government regulator in California the power to say no to excessive premium increases, Californians will not be able to afford their health insurance premiums in the coming year," said Court.
Consumer Watchdog says states like Maine, New York, Oregon and Massachusetts have seen lower rate increases since they began regulating premiums.
"By imposing a rate cap, while politically popular, all it does is suppress rates and may end up with some doctors not being able to continue to get insurance payments and therefore provide coverage," said Johnston.
On the other hand the California Association of Health Plans says capping premiums will reduce funds for vital medial services, like emergency rooms and medical tests.
It says 85 percent of premiums go to medical costs. Premiums go up because of higher costs and to pay for services that are not covered by Medicare and Medi-Cal.
"It's a mistake to oversimplify in the interest of politics," said Johnston.
"Regulation works to keep insurance companies honest and hold down health insurance premiums," said Court.
The bill to regulate insurance rates has a key hearing on Thursday on the floor of the Assembly and then onto the Senate, if it passes. Similar bills previously were vetoed by then Gov. Arnold Schwarzenegger, but this one would arrive on the desk of a new governor and if it gets there, it is expected to be signed.