Rate regulation is 'misguided,' industry groups say

Insurance industry groups say giving California insurance regulators authority to deny rate increases deemed excessive is unnecessary and would compromise the quality of healthcare.

"Rate regulation is misguided," Nicole Evans, spokeswoman for the California Association of Health Plans, told the San Fernando Valley Business Journal. "It will limit access to healthcare services and increase costs by arbitrarily suppressing rates rather than addressing the root cause of rising healthcare costs."

Medical cost inflation is only a small factor in what is driving up costs; other factors include the amount of services people are using, costly changes in medical technology, and demographic changes, such as a growing aging population, Evans noted.

CAHP says passage of the bill, which would allow the commissioner to reject rate increases deemed excessive, would create costly new bureaucracies while other programs are being cut, and it would also hinder patients' access to medical care. "Doctors and hospitals will be even more pressed in their ability to treat patients," Evans said, adding that healthcare professionals rely on private insurers to fill government funding gaps for public insurance programs.

However, California Insurance Commissioner Dave Jones thinks the regulation is necessary. "We've had increases annually here in California the last 10 years--at 10, 20, 30, 40, 50 percent--in the individual small group and the large market, and I think it's ultimately unsustainable," he said. The legislation "would allow me to look at the question of whether or not the rates are excessive from the standpoint of administrative costs and profitability," he said.  

The bill is currently in the state Assembly's Appropriations Committee.

Meanwhile, the California Senate Insurance Committee has blocked a restitution bill that would have given explicit authority to the insurance commissioner to order restitution as part of an administrative enforcement action against an insurance company, reports the Insurance Journal.

To learn more:
- read the San Fernando Valley Business Journal stories on industry groups and insurance commissioner
- see the Insurance Journal article