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CA Legislation to Regulate Health Insurance Rates Stalls

Source: Dow Jones - Jon Kamp


Posted on 02 Sep 2011

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Legislation that aims to allow California regulators to reject increases in health-insurance rates seen as excessive has been shelved for now due to poor prospects for clearing the state Senate.

The bill had passed the California State Assembly in June, but Assembly Member Mike Feuer--a bill co-author and Los Angeles Democrat--said the bill faced longer odds in the Senate. The legislation ran into opposition from the health-insurance industry, while other opponents include the state's Department of Finance.

"Despite an outpouring of strong support from small business, working families and consumers throughout CA, the bill has hit a temporary roadblock in the Senate," Feuer said in a statement. "Right now, not enough Senators are prepared to vote for any form of health insurance rate regulation."

Attempts to pass such a law in prior years also have fallen short. The latest effort stalled on Wednesday.

Susquehanna analyst Chris Rigg said this was an "incremental positive" for health insurer WellPoint Inc. (WLP), since that company has an individual business that is heavily concentrated in California. The "proposal has been a source of investor anxiety," Rigg said.
WellPoint shares edged up 0.3% to $63.50 Thursday. Other big insurers traded lower.

Introduced in December, the bill in question "would require health plans and insurers to seek approval from state regulators prior to raising health care premiums, copayments, deductibles, or other out of pocket costs," according to a press release from Feuer earlier this year. "It would build upon newly-implemented federal and state law improving the health insurance rate filing and review process."

The California Association of Health Plans, a trade group for insurers, called it "a misguided legislative proposal" that didn't address underlying cost pressures that are driving up the price of coverage. The group also noted there are already consumer protections and health limits, such as a requirement under the federal health-care overhaul law that insurers spend a certain percentage of premiums on medical care, with rebates for policyholders if they don't meet requirements.

This legislation has been proposed several years in a row, and still has a chance to pass the Senate, said Jamie Court, president of consumer group Consumer Watchdog.

His group is aiming to collect enough signatures for a ballot measure for the 2012 election that would promise "much tougher reform," such as a 20% rollback in premiums and a public option. Traction on that front might cause insurers to see the stalled legislation as not as bad of an option, Court said.


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