Consumers' Health Insurance Premiums Rise Even As Medical Spending Slows Because California Can't Reject Excessive Rate Hikes
SANTA MONICA, Calif., Feb. 14, 2013 /PRNewswire-USNewswire/ -- The California Department of Insurance announced today that a 17.9% average health insurance rate increase paid by 630,000 Anthem Blue Cross customers on February 1st has been reduced to 13.9%. Anthem should never have charged its customers the double-digit increase, said the nonprofit Consumer Watchdog, but regulators in California lack the power to reject an excessive rate increase before it takes effect.
"Health insurance prices remain unaffordable for Anthem Blue Cross customers who have seen rates go up twice in the last year, an average 22% price spike even as medical spending increases are at record lows. While a reduction of Anthem's massive rate hike is a small piece of good news for consumers, it's too little, too late. Getting a little cash back after highway robbery doesn't prevent the crime," said Carmen Balber, executive director with Consumer Watchdog. "Consumers want to know that their health insurance premiums are justified, and they won't be sure until California has the power to reject excessive rate increases."
Unlike at least 35 other states, California does not require health insurance companies to get approval for rate hikes before they take effect. This loophole in the law meant that many Anthem consumers who were notified of the February 1 rate increase were forced to reduce benefits, change plans or even consider dropping coverage altogether because the rate hike was unaffordable. Those consumers forced to drop coverage or change plans will be allowed to reverse those changes under the agreement.
An initiative measure that will appear on the next general election ballot would give California the authority to publicly review rate increases, and reject those that are excessive before they take effect. It also gives the insurance commissioner the ability to require refunds to consumers of any rate increase, including Anthem's, that is found to be excessive.
The Centers for Medicare and Medicaid Services reported last month that health spending increased just 3.9% in 2011, a record low pace of growth for the third year in a row. The Bureau of Labor Statistics Consumer Price Index reported medical care services increased just 3.7% in 2012. Californians continue to pay double-digit rate increases despite these reductions in health costs because no one has the power to tell insurance companies no, said Consumer Watchdog.
Anthem's parent company, Wellpoint, announced a 38% profit increase in the 4th quarter of 2012 over the previous year, and $2.7 billion in net profits for 2012.
California insurance reform law Proposition 103 regulates auto, home and business insurance rates, and requires insurers to open their books, publicly justify and get approval for rate increases before they take effect. That law was enacted by the voters in 1988 and has saved California drivers $62 billion on their auto insurance premiums. The initiative measure that has qualified for California's 2014 general election ballot would apply the same rules to health insurance companies.
Consumer Watchdog is a nonprofit, nonpartisan advocacy organization with offices in Santa Monica, CA and Washington, DC. Find us online at www.ConsumerWatchdog.org
SOURCE Consumer Watchdog