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Sacramento, CA — Californians have saved $417 million on health care premiums, thanks to the California health insurance rate review process established in 2011. That is according to a new analysis by the California Public Interest Research Group (CALPIRG), California Health Insurance Rate Review: The First Five Years.
In contrast, the analysis also highlights the limitations of the current program, which allows state regulators to review rate hikes and ask questions of the health insurance carriers but does not give regulators to power to stop unjustified rate hikes from going into effect.
The regulators recently started calculating and publishing foregone savings shouldered by the Californian consumers whose insurance companies have forged ahead with their rate hikes despite being declared unreasonable. In 2015 alone, health care customers could have saved as much as $46 million had insurers agreed to lower their rates to levels regulators considered “reasonable.” Conservative estimates suggest that more than 1 million Californians have been subject to rate hikes declared “unreasonable” over the last five years.
“Health insurance rate review is an important tool for transparency and accountability, but it needs to be strengthened,” said CALPIRG Executive Director Emily Rusch. “It is unacceptable that so many consumers get stuck with health insurance rate hikes that are unreasonable and unjustified.”
On Wednesday, the Senate Health Committee will consider legislation by Senator Ed Hernandez, SB 908, that would require insurance carriers to notify their customers if a rate hike has been declared unreasonable, and give customers sixty days to shop around for other coverage.
“Consumers should be notified if their rate isn’t justified and given the option to find a better deal for their dollar,” said Rusch. “That’s why we support SB 908.”
Back in 2010 the legislature passed SB1163 (Leno), which required health insurance carriers to publicly justify any proposed rate increase on individual or small group plans. Health insurance carriers must submit rate filings to state officials for review and the public is able to access the filings online and comment on them. The regulators, the California Department of Insurance (CDI) or the Department of Managed Health Care (DMHC), can meet with carriers to clarify or challenge assumptions driving projected cost increases or request missing information. They can request that the carriers modify or reduce rate increases if they find that they are unjustified but the insurance company can decide whether to comply with the request. If they do not, the regulator can make an official determination that the rate filing is “unreasonable.”
Over the past five years CALPIRG has participated in the rate review program at CDI, contracting with an actuary to conduct our own review of rate hikes that were particularly high and affected a large number of customers, and submitting public comments to CDI actuarial staff for their consideration in their own conversations with the carriers.
Key findings from the CALPIRG analysis include:
- Carriers have voluntarily reduced or withdrawn 69 rate filings after beginning the rate review process, 12 percent of the total number of filings posted.
- Regulators estimate that Californians have saved $417 million dollars as a result of rate increases that were filed with the regulator and subsequently reduced.
- At least 26 times during this period, insurers pushed ahead their rate increases despite regulators declaring them unreasonable.
- In 2015 alone, consumers could have saved as much as $46 million on their premiums if insurers had agreed to lower their rates to a level that regulators deemed “reasonable.”
- An estimated 1,178,191 Californians have been subjected to rate hikes that were declared unreasonable but still went into effect since 2011.
The report also includes policy recommendations for strengthening insurer oversight and accountability to protect more Californians from unreasonable rate increases. In addition to the policy solutions in SB 908, CALPIRG recommends giving regulators the power to reject or modify rate increases, requiring that rate increases be based on reasonable administrative costs, and requiring insurers to use their leverage to cut waste and improve care.
“Health insurance coverage is so critical to our well-being, and it’s required under the Affordable Care Act. The consumer protections in SB 908 are common-sense and should become law.”
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