In the news

Business Week
Adam Weintraub

A key legislative committee approved a bill Thursday to give state regulators the power to reject proposed health insurance rate increases, but the measure faces a stiff fight on the California Senate floor.

The Senate Appropriations Committee approved the bill with a 6-3 party-line vote, with Democrats in support and Republicans opposed.

While GOP lawmakers have been solidly against AB52, some Democrats also have voiced concerns about aspects of the bill, which was narrowly approved by the Assembly in June.

Even if it's passed by the Senate, the bill's fate with Gov. Jerry Brown is uncertain. His administration has warned about the potential for millions of dollars in new costs that could be incurred through hearings and appeals.

The bill has drawn national attention because California's insurance market is so large. The state is home to one in eight Americans, and makes up 11 percent of the national market for those with health insurance through an employer and 15 percent with individual coverage.

Its author, Democratic Assemblyman Mike Feuer of Los Angeles, said he's been working with Senate Democrats on amendments that could help the bill win passage.

"There are very few issues more important to California families than whether they can afford to go to the doctor," Feuer said after the vote Thursday.

Groups representing insurers, doctors and hospitals oppose the bill, as do some broader business lobbies such as the California Chamber of Commerce. They've maintained a heavy drumbeat of lobbying, contending the bill would add to bureaucracy, delay decisions and regulate rates without addressing the rapid inflation of medical costs that drives rate increases.

New opposition has emerged in the past few weeks.

The California Public Employees' Retirement System, the nation's largest public pension fund, voted last week to oppose AB52 because it could increase complexity and interfere in the giant fund's ability to negotiate health benefits. Brown's finance department told senators this month that the additional rate review would require more than 180 additional employees and could boost costs in 2012-13 by $57.7 million.

"Although AB52 has moved to the floor of the Senate, it is clear that the wheels on this misguided proposal are coming off in the closing weeks of this legislative session," Patrick Johnston, president of insurance industry group the California Association of Health Plans, said in a statement.

Backers of the bill include organized labor, advocates for low-income Californians and state Insurance Commissioner Dave Jones, a Democrat, who would gain regulatory oversight of rates along with the state Department of Managed Health Care. Proponents say dozens of other states allow regulatory oversight of health rates to protect consumers.

"With health insurance costs increasing almost 10 percent a year for the past 10 years, consumers can't afford to wait any longer for a real check on rate hikes," said Pedro Morillas, legislative director for the California Public Interest Research Group, in a statement.

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