Health Insurers Kill Real Rate Regulation Legislation; Insurer-Friendly Politicians Line Up Behind Proposal That Will Drive Up R

Jones/Feuer Effort Defeated; Schwarzenegger/Leno Bill Clears Legislature Allowing Insurers to Charge "Unreasonable" and "Unjustified" Premiums

SANTA MONICA, Calif., Sept. 1 /PRNewswire-USNewswire/ -- Sacramento lawmakers, buffeted by hundreds of thousands of dollars in insurance company contributions, defeated a strong insurance rate reform bill supported by consumer and labor organization (AB 2578- Jones/Feuer) late Tuesday night. Democratic opponents of the Jones/Feuer legislation supported an alternative bill, proposed by Governor Schwarzenegger and carried by Senator Mark Leno (SB 1163), that allows insurers to charge excessive health insurance premiums under a new, industry-preferred standard that merely requires rates to be "actuarially sound."

"While Californians face ever-increasing insurance premiums and a looming requirement to buy coverage, Sacramento politicians sided with health insurance companies to defeat rate regulation and let insurers charge whatever they want," said Consumer Watchdog's Executive Director Doug Heller.  "The hundreds of thousands of dollars health insurers spread around the Capitol is chump change compared to the hundreds of millions that insurers will be allowed to overcharge Californians as a result of yesterday's votes."

The defeated rate regulation bill – AB 2578 – would have prohibited insurance companies and HMOs from charging excessive rates and required approval from regulators before health insurance rate increases took effect. Joining all Senate Republicans to defeat the bill were Democratic Senators Calderon, Correa, Negrete McLeod, Wolk and Wright who voted against, as well as Senators Padilla and Price who did not vote.

The Schwarzenegger/Leno bill – SB 1163 – allows insurance companies to increase rates simply by stating the increase is "actuarially sound," which is the same language Anthem Blue Cross used to explain its recent rate hikes.  There is no definition of "actuarially sound," and the term effectively allows companies to charge whatever they want. The bill also allows companies to charge "unreasonable" and "unjustified" rates and prohibits regulators from doing anything more than posting their views on a website. The bill was amended in the final days of the legislative session and never got the kind of scrutiny a bill like this requires, said consumer advocates.

Noting that "SB 1163 embodies the Governor's proposal," the Governor's office issued a press release today applauding the passage of the bill, which had been opposed by insurance companies until the last minute amendments were adopted. Read more about the Schwarzenegger/Leno bill here:

Among the top recipients of insurance industry cash who sided with insurers and voted against real reform are: Democratic Senators Gloria Negrete McCloud ($45,647), Lou Correa ( $44,992), Alex Padilla ($41,893), Ron Calderon ($33,800), Rod Wright ($21,500) and Republican Senators Tony Strickland ($68,750), Dave Cogdill ($54,650) and Tom Harman ($46,900). A full detail of health insurance industry contributions to the California Senate since 2007 is available here:

"If you want to summarize what happened in Sacramento last night, you could say: insurance companies won and Californians lost," said Heller. "Since Sacramento politicians won't take on the health insurance industry, it's clear voters will have to deal with this issue on their own.  We're committed to getting real rate regulation in California before the federal mandate to buy insurance takes effect in 2014."

Consumer Watchdog, formerly the Foundation for Taxpayer and Consumer Rights is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, Ca.  Consumer Watchdog's website is

SOURCE Consumer Watchdog