SACRAMENTO – In a dramatic victory for those who are experiencing exorbitant health insurance rate increases, the California State Assembly passed important legislation by Assemblymember Dave Jones (D- Sacramento) with a vote of 42-33.  Assembly Bill 1554 requires that prior approval be obtained before health insurance rates are increased.  HMOs and health insurers would need to receive approval from the Department of Managed Health Care (DMHC) or the Department of Insurance for proposed rate increases.  Rates requiring approval include premiums, co-payments, and deductibles.  Proposed rate increases would be denied if they were deemed excessive, unfair or discriminatory.  This requirement for rate approval would begin in January 2009 and would put an end to out-of-control health insurance premium increases.

“Californians face skyrocketing health insurance premiums.  Increasingly, Californians cannot purchase health insurance because it is unaffordable.  This measure will require health insurers to justify their premium increases and seek approval for their rates.  This measure promotes health care affordability, which is a critical component of health care reform,” explained Jones.

In 1988, California voters passed Proposition 103 which requires that insurance companies get prior approval of rate increases for automobile, home and property casualty insurance from California’s Insurance Commissioner.  It is estimated that Proposition 103 has saved consumers over $23 billion dollars.

Health care reform is critically important to Californians.  More than 6.5 million Californians are uninsured, while others are underinsured.  The majority of people with health insurance fear that ongoing premium increases will cost them their health insurance coverage.   Health insurance premium increases are soaring far above the rate increases for wages, inflation and medical costs.  According to the Kaiser Family Foundation, health insurance premiums for employer-sponsored policies have increased by an average of 87% over the last six years.  That far surpasses the 20% rise in wages and the 18% rise in overall inflation during that time period. 

Blue Cross of California just transferred $950 million to its out-of-state parent company WellPoint, Inc., while it continues to raise premiums on California policyholders.   Other insurers have also transferred hundreds of millions of dollars to their parent companies in recent years for a total of $4.1 billion transferred out-of-state since 2002.

AB 1554 is supported by individuals who have been the victim of dramatic health insurance rate increases and organizations such as the California Labor Federation, California Public Interest Research Group (CALPIRG), Consumer Federation of California, Foundation for Taxpayer and Consumer Rights, California Federation of Teachers, California Teachers Association, California State Employees Association (CSEA) and Gray Panthers California.