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Sacramento Business Journal

Docs, hospitals, HMOs shelve bill to require state approval of healthcare rate hikes

by Staff Writers
May 23, 2003

Employers scream, but they can't put the lid on healthcare premium hikes.

The state's largest pension fund has lost its clout at the bargaining table and appears certain to approve double-digit percentage rate increases again for 2004.

And now, an attempt at a legislative remedy for soaring healthcare premiums is dead in the water. A controversial bill that would have required state regulators to approve healthcare rate hikes has failed to get out of its first policy committee and been put off until next year.

"It was not a surprise that all the stakeholders would lobby aggressively against it," said state Sen. Liz Figueroa, the Fremont Democrat who carried Senate Bill 26. "It's a bit baffling that everyone agrees there is a problem, but when there's a vehicle to change things, everybody says it should be done differently."

SB 26 will be back. "It's my absolute responsibility to do this," Figueroa said.

Borrowing an idea from car insurance: For relief from soaring healthcare insurance rates, Figueroa wants to set up a system of prior state approval of rate hikes similar to the one created by Proposition 103, the California automobile insurance rate initiative approved by voters in 1988.

SB 26 is sponsored by the Los Angeles-based Foundation for Taxpayer & Consumer Rights, the group that championed Prop. 103.

The bill would have required the state Department of Managed Health Care or the Department of Insurance to approve increases in premiums, co-payments, coinsurance, deductibles or other charges by an insurance plan.

It would have gone further, to require refunds if the state determines that rates charged since April 2000 are excessive or discriminatory.

HMO profits soar as whopping premiums are forcing business to cut back on coverage, states a Senate Insurance Committee analysis of the bill. Simultaneously, employee co-payments and deductibles rose as much as 27 percent last year.

The three big for-profit HMOs in Greater Sacramento saw their combined net profits jump 74 percent from 2001 to 2002, a tally by the Business Journal shows.

"There's clear evidence that skyrocketing premiums are being fueled by record profits," said Jerry Flanagan from the Foundation for Taxpayer and Consumer Rights. "This bill is intended to make sure small businesses and others are not priced out of the healthcare market."

'Can't regulate away the trends': SB 26 generated immediate opposition from all sides. Health plans were a natural, but doctors and hospitals hated it, too.

The, California Healthcare Association, a trade group, for hospitals, opposes rate regulation of any kind, said spokeswoman Jan Emerson.

When government wants to control healthcare costs - as it does in Medicare and Medi-Cal - cuts show up in reduced doctors' fees, said Steve Thompson, a lobbyist for the California Medical Association. This makes control an economic issue for doctors.

"In the end, I think there was a recognition that you can't regulate away the underlying trends behind rising healthcare costs," said Bill Wehrle, an analyst with the California Association of Health Plans, an HMO trade group.

"People are getting older. There are new drugs and technology. Hospitals and doctors want to be paid more," he said. "You can't wish these things away with legislation."

The Foundation for Taxpayer and Consumer Rights was perhaps an unfortunate choice to carry the torch.

"The sponsors are not the most beloved group in the Capitol," Wehrle said, "because of their tendency to call everybody crooks."