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June 03, 2007

Health Insurer Cost Curb Takes Major Step in California Legislature

A bill by California Assemblymember Dave Jones that would require health insurance companies to justify and defend their rates and profits passed the Assembly Appropriations Committee today on a 12-5 vote, meaning that it will get a vote of the full Assembly this week. It was a significant defeat of powerful insurance industry lobbying. The Foundation for Taxpayer and Consumer Rights is a strong supporter of the bill, AB 1554.

No matter what health reforms are ultimately passed this year in California, Assemblyman Jones’ bill would keep down costs to the state, to employers and to individuals. It is particularly important to have these curbs on spiraling insurance premiums if either employers or individuals are required to buy health insurance.

The legislation is similar to requirements in the auto insurance market under Proposition 103 that have saved drivers billions of dollars since 1988 and driven down California auto premiums in relation to other states. AB 1554 would control the administrative waste and profiteering that allowed Blue Cross of California to keep, as overhead and profit, 50% of every premium dollar collected from individual policyholders, and that has increased insurance premiums to levels far above the increases in overall medical inflation.

The proposed legislation, AB 1554:

• Requires health plans to provide detailed financial information to the regulator with each premium increase request.

• Establishes a clear legislative directive that no rate, co-payment or deductible shall be approved or remain in effect which is deemed to be “unfair or excessive.”

• Allows consumers and consumer groups to intervene in rate review proceedings to ensure that the legislative intent is implemented.

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Posted by healthinsurance at June 3, 2007 09:35 PM