News CoverageThe Daily News of Los Angeles
Bill seeks cure for health care premiums; Insurance hikes would need OK
by Evan Pondel, Staff Writer
Apr 09, 2003
SANTA MONICA -- The Foundation for Taxpayer and Consumer Rights is sponsoring legislation introduced Tuesday that would require health insurers to gain state approval before raising premiums.
The initiative parallels current standards set for the home and auto insurance industry, which require state regulators to sign off on all rate changes. State Sens. Liz Figueroa, D-Fremont, John Burton, D-San Francisco, and state Assemblyman John Laird, D-Santa Cruz, introduced the new bill Tuesday in Sacramento.
The sponsor of the legislation says rising insurance rates are the primary culprit for the more than 6 million uninsured residents in California.
"We're seeing premiums skyrocket these days. And it's time for health insurance premiums to be regulated," said Jamie Court, executive director of the Santa Monica-based consumer watchdog group. "We need to protect consumers and hold the insurance industry accountable."
In an industry often criticized for squeezing the quality of care to bolster the bottom line, California small businesses are enduring the greatest pain -- with firms of 50 employees or less experiencing a 20 percent increase in health insurance premiums last year, Court said during a news conference Tuesday morning in Santa Monica.
Laurel Kaufer, a Calabasas attorney who runs her own mediation firm, has experienced a 250 percent increase in health insurance premiums since 1998. Kaufer currently pays Blue Cross of California $448 a month for a Preferred Provider Organization policy.
"I like being able to choose my own doctor, but these rates are ridiculous," she said. "I want to see mandated caps on increases, which should be approved by a panel of nonindustry personnel."
Kaufer's opinion stems from her struggle as a self-employed single mom supporting two children. A recent trip to a neurologist after her son was hit by a baseball further articulated Kaufer's desire for health care reform.
"I had $75 coinsurance payment and because it's early in the year and I haven't met my deductible I have to pay the remaining 70 percent of the bill as well," she said.
But health insurers are not convinced regulating insurance premiums would keep costs down. The method used to assign auto insurance rates differs from how health insurance premiums are calculated, according to Michael Chee, a spokesman for Woodland Hills-based Blue Cross of California.
Chee characterized the bill's platform as "very misleading." He said the proposed legislation "could potentially jeopardize the financial stability of the entire industry."
"The bill's platform also offers no proof of how the legislation will affect premiums. Rates are a function of health care costs," Chee said. "And if they (advocates of the bill) are arguing against the profits we make, the average profit for an HMO in California is about 1.8 percent. We've been making 4 cents for every dollar for the past five years."
WellPoint Health Networks Inc., Blue Cross of California's parent company, reported its fourth-quarter earnings rose 64 percent on increases in new membership and because "premium pricing was sufficient to cover medical cost trends."
Court said WellPoint's profits are evidence that membership levels are not the only factors "at work here. If they weren't indiscriminately raising premiums, those profits wouldn't be as high as they are today."
Lisa Haines, a spokeswoman for Woodland Hills-based Health Net Inc., disagrees with Court's focus on profits. "Premiums have to keep pace with rising health care costs. So they (The Foundation For Taxpayer and Consumer Rights) should focus on the issue of rising health care costs," Haines said. "The focus on premiums is going to get us nowhere, eventually leading to more uninsured consumers in California."