State of Health Blog from KQED News » Health Insurance Rates

State Hires Consumer Group To Help Review Health Insurance Rates

Lisa Aliferis — Wed, 03 Apr 2013 22:29:33 +0000

California Insurance Commissioner Dave Jones has irritated the insurance industry and surprised public-policy analysts by hiring Consumer Watchdog, a vocal insurance industry critic, to assist in reviewing health insurance rate increases, the Los Angeles Times reports.

In a one-year contract worth up to $88,000, Consumer Watchdog will supplement the rate review process already done by the insurance department.

From the Los Angeles Times:

The insurance industry expressed dismay that the state enlisted its longtime nemesis to help review rate increases, and some experts questioned whether it’s necessary to further antagonize insurers at a time when state officials are trying to work closely with the industry to implement a massive healthcare expansion.

Public-policy experts also scoffed at the arrangement.

“Their very aggressive stance against insurance companies raises serious questions about a conflict of interest,” said Jessica Levinson, a Loyola Law School professor and expert on government ethics. “You want an independent researcher.”

Patrick Johnston, president of the insurance trade group California Assn. of Health Plans, said, “Any review of health plan rates should be conducted by independent, impartial consumer groups that do not have political conflicts of interest and financial motivations.” …

(I)n an interview, Jones defended using grant money from the federal healthcare law to hire Consumer Watchdog.

“I think it’s important to have the consumer perspective, but at the end of the day we make our own determination,” Jones said. “This grant funding is a drop in the bucket compared to the hundreds of millions of dollars health insurers and HMOs have on their side. I think ordinary Californians know the deck is stacked against them.”

Jamie Court, president of Consumer Watchdog, said the group’s proven track record in challenging insurance company practices made it an ideal choice for the state. …

“We are the foremost expert on health insurance rates,” Court said. “This grant allows us to pull back the curtain and show how the wizards at Anthem and other companies are manipulating Oz. We want to prove that rates are too high.”

That approach by Consumer Watchdog troubled some observers.

“It’s like asking one of the Dodgers to umpire a big game for the San Francisco Giants,” said Dan Schnur, director of the Jesse M. Unruh Institute of Politics at USC. “Consumer Watchdog is a very well-respected organization, but the commissioner is clearly going out of his way to predetermine the outcome.”

Insurance Commissioner Calls Aetna Rate Hike “Unreasonable”

state of health — Fri, 06 Apr 2012 21:17:25 +0000

By: Kamal Menghrajani

Aetna has raised rates on its PPO by 30 percent in the past two years. (Images Money: Flickr)

If you were a California business making nearly 28 percent profit, would you change your business strategy if someone asked you nicely?

Probably not.

In a nutshell, that’s what’s going on between California’s Department of Insurance and the health care insurer Aetna.

The Department of Insurance has many jobs, one of which is to make sure that rates stay reasonable by regulating what insurance companies can charge consumers … with one exception.

According to Insurance Commissioner Dave Jones, “I have that authority for auto insurance, for homeowners’ insurance, for property insurance, for casualty insurance — basically for almost all other insurance lines, except health insurance and HMO products.”

“This is the first time that a health insurer has disregarded our request that it lower its rate increase.”

Jones doesn’t like it. “It’s quite a loophole, and it’s a loophole through which health insurers and HMOs have been driving ever-increasing rate hikes –- 10-20-30-40 — sometimes as much as 80 percent annual rate increases.”

This time around, Aetna increased their PPO rates by 1.8 percent for the quarter that began April 1^st. This seems like a modest hike, but it brings up the total rate hike in the last year to 8 percent, and it means that small businesses are paying 30.3 percent more for health insurance than they were two years ago.

Since the Commissioner cannot force Aetna to offer more reasonable rates, he can only ask.

And this time, Aetna declined.

“This is the first time that a health insurer has disregarded our request that it lower its rate increase,” said Jones. Both sides did extensive studies to look at the projected increases in Aetna’s cost of providing care. Aetna did an internal analysis and had a third-party actuary confirm and certify their projections. The Department of Insurance did their own actuarial study, based on the company’s claims history. But, the Department said the increase did not seem warranted and labeled it “unreasonable.”

Add this to the Commissioner’s report that Aetna made 27.7 percent profit last year and generated $1.7 billion for their national parent company, and it’s easy to understand why Jones doesn’t think Aetna needs to be asking more of its California subscribers.

“No other industry is making the kind of record profits, except the oil industry, that the health insurers and HMOs are making. And they’re making those excessive profits at the expense of ordinary Californians, California’s families, and California’s businesses,” said Jones.

Aetna Director of Communications Susan Millerick says that the company is using that $1.7 billion to improve the services they provide.

“The dividend to the parent is re-invested in the business,” she said. She gave some examples of where the money might go: faster claim processing time, investments in new technology, consumer tools – things that will ideally make healthcare more affordable.

But if they are making health care less expensive, how can they justify charging more for it?

“You have to make the investment and you have to encourage consumers to use [tools to make better health care decisions],” she said. “Until consumers really embrace their roles … and realize that they can make informed choices, you’re not going to see the cost curve bend.”

For now, Commissioner Jones says there is nothing he can do about the current increases. “The health insurers and HMOs can raise the rates as high as they would like. And they do,” he said.

Proposed Ballot Measure Seeks Tougher Health Insurance Rate Regulation

Lisa Aliferis — Mon, 27 Feb 2012 23:44:35 +0000

The ballot initiative would grant California's Insurance Commissioner the authority to reject health insurance rate increases. (Photo: Thinkstock)

In more than 30 states, government insurance departments have the authority to reject what they determine to be excessive rate hikes for health insurance. But not in California. Earlier this month, consumer advocates launched a drive to put an initiative on the November ballot to let voters decide if California’s Insurance Commissioner should have this power.

“Right now, my sole authority over rates, if I find a rate to be unreasonable, is to sentence a health insurer to my website,” joked Dave Jones, California’s Insurance Commissioner, in an interview.

That’s a bit of an overstatement, as his department does review rates, making sure the math is right and ensuring there are no inaccuracies. Still, what the Department is left with is “whatever element of the bully pulpit we have to try to rein those rates in,” Jones says.

Before he was Insurance Commissioner, Jones served as an Assemblyman. He says he introduced legislation in the State Assembly every year for seven years to give the Insurance Commissioner more authority over health insurance rates. But his bills never passed. When he was sworn in as Insurance Commissioner a year ago, he again authored legislation. It went through the House, but is a handful of votes short in the Senate, he says.

“After having tried to accomplish this through the legislature for the last seven years,” Jones says, “I know only too well how influential the HMOs and the health insurers are in the state legislature. Time and time again, they’ve been able to block this legislation, so I think it’s time we took this issue to the voters of California.”

Enter Consumer Watchdog–the Santa Monica advocacy group that in 1988 backed Proposition 103. While most Californians associate Prop. 103 with auto insurance rate reform, the law also gives the Insurance Commissioner the right to reject rate hikes in property and casualty insurance. Now Consumer Watchdog is behind an effort to give the Insurance Commissioner the same level of authority over health insurance rates. To quality for the November ballot, the group needs 505,000 valid signatures by May.

“We’re trying to get on the November ballot and we’re doing it with as much volunteer energy as we can,” said Jamie Court, President of Consumer Watchdog. “This is basically about making sure health insurance companies publicly justify their rates under penalty of perjury before they take effect. It’s all about getting approval from the government.”

U.S. Senator Dianne Feinstein has long backed this increased regulatory control. Today her office provided an email where the Senator says she was the first person to sign Consumer Watchdog’s initiative. “Consumer Watchdog’s ballot measure would require health insurance companies to publicly justify their rates before rate hikes take effect,” Feinstein wrote in the email.

In an opinion piece in the Sacramento Bee last summer, Feinstein wrote:

Since 1999, average health insurance premiums for family policies have risen 138 percent, while medical inflation rose just 31 percent, putting insurance out of reach for millions of Californians.

For Valerie Burchfield-Rhodes of Laguna Niguel health insurance is still within reach, but at tremendous cost. She says health insurance is her family’s biggest household expense each month, “substantially more” than their mortgage. In 2010, her family was paying $1,053 monthly, but in 2011 their premium jumped 36 percent to $1,434 a month with the highest deductible available to them–$7,000.

“I flipped out,” she told me. “I was writing letters and contacting people and calling reporters and freaking out because it was so expensive.” She estimates her family is currently paying $24,000 annually between premiums, the deductible and co-pays for some of her husband’s treatment for diabetes.

But health insurers say additional regulation is unlikely to be a panacea. “Rate regulation may sound appealing,” said Steve Shivinsky, a spokesman for Blue Shield said last week in the L.A. Times, but “It will layer in another complex bureaucratic level of rate review that will gum up the system.”

Insurance Commissioner Jones anticipates a different response from health insurance companies. “Now what the insurers argue [is] ‘oh my gosh, if we give the Insurance Commissioner that authority, it’s going to be the end of the world as we know it, and we’re all going to stop writing insurance. We’re going to leave the State of California.’ In fact, they made that argument in 1988,” Jones says in a reference to the Proposition 103 campaign. “But in truth what happened was they continued to write insurance in California, we continue to have all of the major national insurers still writing insurance in all these product lines and they make a reasonable profit. But what was the best thing about Prop. 103, it saved consumers and business tens of billions of dollars.”