News CoverageThe Los Angeles Times
State Approval of HMO, Insurer Rates Proposed
Sen. Figueroa's bill targets 'excessive' health-care costs that she says mean no insurance coverage for thousands of residents.
by Carl Ingram, Times Staff Writer
Apr 09, 2003
SACRAMENTO: In a new attack on steeply rising health-care costs in California, consumer advocates and senior organizations Tuesday demanded that insurance companies and health maintenance organizations submit to state approval before increasing their rates.
State Sen. Liz Figueroa (D-Fremont) said it made "no sense" for the state to regulate the "excessive" rates of homeowner and automobile insurers but give a free pass to companies that "insure our very lives and the lives of our children."
She and Senate Leader John L. Burton (D-San Francisco) announced the expansion of a pending Figueroa bill that would subject the premiums, co-payments, deductibles and other consumer charges to approval by regulators at the state departments of Managed Care and Insurance.
The bill, SB 26, is sponsored by the Foundation for Taxpayer and Consumer Rights. The group is a descendant of Voter Revolt, which in 1988 wrote and passed Proposition 103, an industry-opposed landmark initiative that braked skyrocketing automobile insurance rates.
Figueroa, who is backed by representatives of the foundation and senior citizen lobbies, said at a news conference that "excessive" HMO and insurance rates were to blame for thousands of Californians and their employers being unable to afford health-care coverage. At the same time, she said, HMOs were raking in "record profits and record surpluses."
She accused a "greedy" handful of HMOs, which dominate 80% of the California market, of standing in the way of heath care for "our children, neighbors, friends and loved ones."
Jerry Flannigan, of the Foundation for Taxpayer and Consumer Rights, said studies have shown that rate increases have far outpaced inflation in the medical arena. As an example of runaway profits, he said, PacifiCare was reported to have posted a $37-million profit in the last three months of 2002.
Others also did well, according to published reports. WellPoint Health Networks, the parent of Blue Cross of California, reported net income of $523 million in the first nine months of 2002, a 72% increase over the same period the previous year. During the same nine-month period, Kaiser reported a net gain in income of $595 million, a 20% increase.
But William Wehrle, an executive of the California Assn. of Health Care Plans, whose membership includes virtually every HMO and such major groups as Kaiser and Blue Cross, said rate increases were not to blame for steadily rising health-care costs in California.
Wehrle said the real culprits are a population that is living longer, costly development of medical technologies and new medications, and an increased demand for services. "This bill doesn't do anything to address the causes of health-care costs. You can't wish things away just by passing a state law," he said.
Wehrle said that the overall profit margins of the eight biggest California health plans averaged 1.4% in 2001 and 1.6% last year, levels that he said were "way less than grocery stores."
Wehrle said the bill would provide an earnings opportunity for its chief sponsor, the federation of consumers and taxpayers. He said that a "buried" provision would allow the foundation to enter rate cases as an intervenor with special expertise and be compensated for it. He said Voter Revolt acted as a compensated intervenor in many cases involving its Proposition 103.
Burton also is the author of a universal health-care bill that would require employers to pay to insure virtually every member of California's working poor and others who cannot afford it. He said that because employers would be required to pay the premiums under his bill, they should be protected by the cost controls of Figueroa's bill.
A spokesman for the California Chamber of Commerce, which opposes the universal health-care bill, said his organization had not examined the latest version of Figueroa's bill and had not taken a position on it.
Burton and Figueroa conceded that her bill faces a rough journey at the hands of the powerful insurance lobby.