Consumer Watchdog: Health insurance industry funded fraud
The initiative will require health insurance companies to open their books and justify their rates under penalty of perjury.
Consumer Watchdog Campaign, sponsor of the initiative, pointed out that successful regulation of California's auto, home and commercial insurance rates, which would be extended to health insurance under the November ballot measure, saved consumers more than $102 billion on their auto insurance rates over the last twenty-five years, according to a 2013 Consumer Federation of America report. The Consumer Watchdog initiative will extend these savings to health insurance rates.
California's big health insurance companies have given $25.4 million to the campaign to stop the initiative and the study, written by a 25-year health insurance industry executive, is funded by their campaign.
The report claims that allowing Californians to review and challenge rate hikes will slow down the Covered California exchange, despite the fact that rate review has occurred for the last year, only without the ability to stop unreasonable rates.
The study, by 25-year health insurance company executive (Tufts Health Plan, Blue Cross of Massachusetts) and industry consultant Jon Kingsdale, criticizes the right of the public to challenge excessive rate hikes.
Consumer Watchdog Campaign pointed that out that while there have been very few legal challenges by public interest groups under Proposition 103, they have produced huge savings for the public. Consumer Watchdog alone has stopped $2.9 billion in unreasonable rate hikes between 2003 and 2014.
Very few property casualty insurance company rate filings are challenged by public interest organizations, despite the industry study's false contention that more than 5% of proposed rates are challenged. 6500 rate filings were made last year, for example, at California's Department of Insurance and only 14 petitions were made to challenge those rates – that's 0.2%. he 7 rate challenges brought by Consumer Watchdog produced $240 million in savings.
Contrary to the study's threat that every rate will be tied up in lengthy court battles, only two Proposition 103 rate cases were appealed to the court system over the last ten years.
Given the small number of health insurance company rate filings allowed under the Affordable Care Act – there will be just dozens of the required annual filings – any review and/or rate challenges for health insurance can be easily processed. By comparison, there are 6,000 to 8,000 property casualty rate filing in any given year.
Department of Insurance staff and experts in the process of public challenges to rate hikes report that any delays during rate challenges are due to insurance companies' stonewalling data requests.
Most rate disputes are informally resolved quickly, but the challenges to rate hikes that drag on do so because insurance companies delay the proceedings to continue charging higher rates than allowed for as long as possible. If they fail to supply information and data needed, as they often do, the higher rates that are in effect continue until the case is resolved. Rate challenges almost always result in rate decreases so insurance companies have every incentive to stall rate proceedings.
Under the rate regulation initiative, health insurance companies will have no incentive to delay data requests in any rate challenges for Covered California products because the products will continue to be sold at the old rate, until a new one is approved. Under state rules, health insurance companies will have to make refunds for excessive rates to consumers but will not be able to increase rates in the middle of the year, so they have every incentive to make the process smooth and timely.
Ample time for rate review and intervention exists under current law given the small number of health insurance rate filings annually and the incentives for health insurance companies to not delay. The public has a right to hearing in a rate challenge only if rate hikes are greater than 6.9% and these hearings can be expedited. ■