In the face of jawboning by Insurance Commissioner Steve Poizner and other politicians, Anthem Blue Cross, California’s largest for-profit health insurer, announced Saturday that it will postpone its planned 39 percent rate hike.
That’s welcome news.
Rate hikes of this magnitude would surely prompt thousands of Anthem’s 700,000-plus customers in California to drop their individual coverage, putting more strains on emergency rooms. Hospitals would then pass costs onto insurance companies, which would respond with ever-higher rate hikes.
It’s a vicious downward cycle.
Part of the answer, of course, is national health care reform, which (if Congress gets it right) would help cover all Americans and require all to obtain insurance. That would reduce costs that hospitals must either absorb or pass along, eliminating one of the cost-drivers to the current system.
Yet given the chance that Congress won’t act on real reform in the near future, California must have a strategy to deal with insurance companies that seek rate hikes above the inflation rate for medical costs. One clear option is to regulate the rates that health insurance companies charge.
It won’t be easy.
In 2007, Assemblyman Dave Jones introduced a bill that would have granted regulatory power to the state. The Sacramento Democrat managed to push the bill through the Assembly, but the measure failed to pass the Senate Health Committee.
Jones introduced a similar bill in 2009. That bill didn’t even get out of the Assembly Health Committee that Jones chairs.
Republican legislators opposed the measures in unison, hewing to their supporters in the insurance industry and business groups such as the Chamber of Commerce. But Democrats had big majorities in both houses and could have passed the regulation if they saw fit. They didn’t.
The clout of the insurance industry, and Anthem Blue Cross in particular, is one explanation. Between 2007 and 2009, the company spent more than any other single company on its lobbying in Sacramento – $6.65 million. That was $500,000 more than runner-up AT&T. The company is a major campaign donor, giving $6.9 million to California candidates and causes since 2000.
In 2007, it sent a letter to the Senate Health Committee contending that if Jones’ bill were to become law, “insurers will be less motivated to propose innovative products and less motivated to make minor, consumer-friendly changes to existing projects …”
Hmmm. Was a 39 percent rate hike the sort of “consumer friendly changes” that Anthem Blue Cross had in mind?
State-by-state regulation of insurance companies is hardly an optimal outcome. It is inherently inefficient. Here in California, it could well prompt insurers to drop covered services or take other steps to maximize profits.
Yet if Congress refuses to act – and if insurance companies continue to fund stealth campaigns to kill national health reform – then California will have little choice but to join other states that are already regulating health insurers.
The rate hikes that Blue Cross is contemplating can’t be squared with reality.
They reek of price gouging.