A controversial insurance bill has been approved by the California Assembly. Next, the bill must be passed by the state Senate, and then signed by the Governor. If this happens, then it will become a law that gives California state regulators the power to reject excessive health insurance rate hikes.
The bill still has a way to go, but it is heading in the right direction, in my opinion. Currently, regulators in California, including the California Insurance Commissioner, lack the legal power to prevent insurance companies from imposing unreasonable rate hikes on their customers.
They do have the legal right to demand that insurance companies provide them with information that explains why the insurance company feels that a rate increase is appropriate. Regulators can publicly express their opinions about proposed rate hikes, but that is about all they can do.
Each individual state has the right to make laws that dictate how much power their Insurance Commissioners and regulators are allowed to wield. Plenty of other states have given their insurance regulators the power to change, or to flat out refuse, the proposed rate increases presented by insurance companies in their state. For whatever reason, California did not choose to consider giving its insurance regulators this sort of legal power, until now.
It is possible that recent events were what caused lawmakers to create the AB52 bill. Last year, Blue Shield of California announced that the insurance company was going to raise the cost of premiums by 59%. It took a lot of public outcry before the insurance company decided to change their mind about following through with that idea. There is no guarantee that public opinion will be as influential the next time an insurance company wants to do a huge rate increase.
In April, the Department of Managed Care publicly stated that Anthem Blue Cross’s most recent rate hike was “unreasonable”. No one had the authority to stop the insurance company from forcing this rate hike onto their customers, however. On average, this increased premiums by 16%.
The California Assembly passed the AB52 bill by a vote of 47 to 28. Several of the Republican legislators chose to walk off the floor as a form of protest against this bill, instead of casting a vote for or against it, officially. They walked out immediately after the bill was discussed. There were some Democratic legislators who also refused to vote, but who did not leave the Assembly.
Next, this bill goes to the California Senate. If the Senate passes it as well, then it goes to the California Governor. He can choose to sign it into law, or to veto it. If the bill passes through the entire process, the result would be that California insurance regulators would gain the legal right to reject or modify excessive health insurance premiums (or rate hikes). This would match their current legal right to regulate the cost of auto insurance and homeowners insurance.
Image by LWY on Flickr