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November 03, 2007

Governor's Health Plan Hides the True Cost of a Mandatory Purchase Requirement, Testimony Shows

California Health and Human Services Agency Secretary Kim Belshe indicated in legislative committee today that the financial estimate of the Governor's plan to require all Californians to buy private insurance policies does not consider the impact of double digit insurance company premium increases. The proposal does not add up to affordability, said the Foundation for Taxpayer and Consumer Rights.

In response to questions from Assemblyman Dave Jones (D-Sacramento), Belshe argued that costs would somehow be contained, yet the $14 billion estimate of the plan's cost appears to be based on annual medical inflation--doctor and hospital rates--which range from 4% to 6%. This does not take into account that insurance premiums have increased two to five times faster than medical inflation. Dramatic insurer premium increases of the last several years are due to huge profit increases, vast cash reserves and administrative waste, said FTCR.

"Californians deserve an honest debate of how much health care will cost under the governor's plan to require them to buy private insurance policies," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights (FTCR). "The bottom line is that governor's plan does not add up. Health care will never be affordable for patients, the system, or the state's taxpayers when insurers are allowed to charge whatever they choose."

Massachusetts passed a similar law requiring residents to buy private health insurance last year. That program, which goes into effect in January, has already experienced cost increases far beyond what was promised by policymakers when the bill was passed.

In response, Massachusetts Senate President Therese Murray (D-Plymouth) has proposed a plan to require health insurance to justify rate increases in excess of 7%. She also said that the state's insurers should spend down their $2 billion in excess reserves to keep premiums affordable.

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Posted by healthinsurance at November 3, 2007 07:58 PM

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