Anthem Blue Cross could owe big refund checks to 730,000 Californians if its proposed rate hikes of up to 25% are deemed excessive thanks to an initiative voters will consider on the 2014 ballot.

The ballot measure requires health insurance companies to get approval before raising rates and allows that refunds be ordered on rates that are considered excessive after November 6, 2012.  When voters approve the measure, the insurance commissioner will have the power to retroactively order refunds for excessive rates.

Read the initiative here

“Anthem and every health insurance company in California are on notice: Excessive rate hikes they impose today could mean big refund checks for consumers down the road,” said Carmen Balber with Consumer Watchdog.

Anthem has proposed rate hikes averaging 18%, and as high as 25%, for 630,000 individual policyholders.

It has proposed rate hikes averaging 15%, and as high as 25%, for another 100,000 individual policyholders.

The Insurance Rate Public Justification and Accountability Act qualified for the ballot in August, after Consumer Watchdog Campaign and allies submitted petitions containing 800,000 voter signatures.

“Californians can no longer afford the outrageous double-digit rate hikes health insurance companies like Anthem have imposed year after year, and sometimes multiple times a year, ” said Jamie Court, proponent of the ballot measure and president of Consumer Watchdog. “This initiative gives voters the chance to take control of health insurance prices by forcing health insurance companies to publicly open their books and justify rates, under penalty of perjury.”

Senator Dianne Feinstein, the first person to sign the ballot petition, is an honorary co-chair of the ballot initiative campaign, which is also supported by California Insurance Commissioner Dave Jones.

The ballot initiative builds on California’s successful model of rate regulation for auto, home and other property and business insurance. That law, Proposition 103, was enacted by the voters in 1988 and has saved California drivers $62 billion since it was enacted.

The Insurance Rate Public Justification and Accountability Act:

• Requires health insurance companies to publicly disclose and justify, under penalty of perjury, proposed rate changes before they take effect.
• Makes every document filed by an insurance company to justify a rate increase a public record.
• Requires public hearings on proposed rate increases.
• Gives Californians the right to challenge excessive and unfair premium rate increases.
• Prohibits health, auto and home insurers from considering Californians’ credit history or prior insurance coverage when setting premiums or deciding whether to offer coverage.
• Gives the elected insurance commissioner authority to reject unjustified rate increases.

Just when consumers are finally getting a look at how health insurance companies conduct their business, the industry is racing to shut and lock the door. Buried deep in a “model law” for states to update health insurance regulation is a clause that would keep secret the companies’ justification for  exorbitant rate increases.

Why’s this so bad? Because one of the few ways patients and consumer groups can tell whether a rate increase is justified is to closely examine the data-heavy actuarial reports that insurers use as their defense. In states with consumer-friendly insurance commissioners, some have found gross math errors in favor of the companies. (Simple mistakes? Maybe.) Without access to actuarial and other related data, consumers can’t even hold an unfriendly insurance regulator to account, much less force the company to back down.

The “model law” is being drafted by the National Association of Insurance Commissioners, a private body of state insurance commissioners. It has long been criticized for being too cozy with the industry. The NAIC, however, has also drafted a lot of the regulations governing health insurance reform nationally, with the explicit approval of the Department of Health and Human Services. So what the NAIC says and does matters to every insurance policyholder.

Here’s the industry-friendly secrecy clause tucked into the NAIC’s model law, which most states would closely follow in drafting their own laws:

Each health carrier shall file with the commissioner annually on or before March 15, an actuarial certification certifying that the carrier is in compliance with this Act and that the rating methods of the carrier are actuarially sound. The certification shall be in a form and manner, and shall contain such information, as specified by the commissioner. A copy of the certification shall be retained by the carrier at its principal place of business.

(3) (a) A health carrier shall make the information and documentation described in paragraph (1) available to the commissioner upon request.

b) Except in cases of violations of this Act, the information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the commissioner to persons outside of the Department of Insurance except as agreed to by the health carrier or as ordered by a court of competent jurisdiction.

There is a lot of room for mischief in an actuarial certification, especially when the actuarial company depends on the insurance company for its pay. The insurance industry primarily uses the certifications as a shield against state oversight, especially any attempt to lower rates.

Under this clause, a state insurance commissioner could have trouble even telling the public why an insurance rate is unjustified,  turning protective oversight  into a he said-she said catfight. Given tens of millions in lobbying money employed on the insurance industry side, it wouldn’t be an even battle Consumers couldn’t fight back against rates without data to back their argument.

If the secrecy clause stays in, states that already make such data public. like California, will find their legislatures swarming with insurance lobbyists pushing to put the data back in a closet, because the NAIC model law says to do it. The insurance lobby has repeatedly blocked state authority to deny or modify rate increases, so for a $35-million annual lobby, a little secrecy looks easy.

There is almost no such thing as a “trade secret” in a service industry like insurance. The companies don’t need to keep their actuarial reports secret from other insurers–they just need to keep the data away from outraged consumers.

The NAIC’s own consumer representatives oppose the industry secrecy clause. We hope the Department of Health and Human Services, which has strongly favored disclosure and transparency, will also weigh in. Otherwise, it will be up to the states to understand that this clause is a model of nothing except the lobbying might of the health insurance industry.

Consumers who’d like to fight back, at least in California, can start by learning more about the Consumer Watchdog Campaign’s November ballot initiative. It would make insurance companies justify their rates before they go into effect, and reduce or retract rates if they’re unjustified.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Thursday’s reports that some Californians will get rebates on their health insurance premiums are a little bit of good news–but not nearly as good as it could be.

An L.A. Times story reports that California small businesses and their employees who are insured by United Health Group will get rebates averaging $98 on last year’s premiums because United Health didn’t spend at least 80% of the premiums on health care, a requirement under the federal health reform. The total will come to about $3.5 million in the state. Other insurers may also owe money on small business, large employer and individual policies–the figures are still being crunched.

But what if insurance companies could not overcharge us in the first place? The 80% rule in the federal law only encourages insurance companies to pay hospitals and doctors inflated prices, because it inflates the 20% that insurance companies get to keep. (It’s like the Hollywood agent who gets a 15% cut–his personal incentive is to get the biggest price for his client.) With no real curbs in California on how much insurance companies can charge, they have no incentive to bargain for lower medical costs to begin with.

Unlike 35 other states, California has no power to make health insurance companies justify their rates and to deny or modify unreasonable or unjustified rates before they go into effect. Californians also have no right to make the state do its job through consumer challenges to unjustified rates. All this would change if voters pass an initiative, sponsored by the Consumer Watchdog Campaign, that’s headed for the November ballot.

Which brings us to another huge source of savings–the inflated rates that insurance companies encourage hospitals and in some cases doctors to charge. A shocking recent story, also in the L.A. Times, found that patients who are insured are often paying out of pocket many times the amount of patients who pay cash for the same treatment.

Here, from the story, is how it works:

Many hospitals, doctors offer cash discount for medical bills

The lowest price is usually available only if patients don’t use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.

May 27, 2012|By Chad Terhune

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336.

Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054.

“I couldn’t believe it,” said Snyder, a 57-year-old hair salon manager. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance.

That disparity in pricing is coming under fire from people like Snyder, who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment.

The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400.

When The Times called for a cash price, the hospital said it was $250.

Is your blood boiling yet? Insured patients can try to pay the cash price, but elsewhere in the story we find that hospitals may not even allow patients with insurance to get the cash price. And if you pay cash, it doesn’t count against your deductible or the out-of-pocket limit for your policy. Is this cozy or what for the (usually for-profit) insurance companies and (often for-profit) hospitals?

If California had the power to approve, deny or modify unjustified health insurance rates before they went into effect, the insurance companies would have to do more than prove they’re spending 80% of your premium on whatever they can define as “health care.” With their books open and both consumers and regulators looking on, they’d have powerful incentives to push harder to bring down costs, just as auto insurance companies do—in large part because regulators are watching. Executive compensation in the millions would no longer come out of patients’ pockets.

That form of regulation, called “prior approval” of rates, is the aim of the ballot initiative sponsored by the Consumer Watchdog Campaign. The same kind of regulation, passed by voters as Proposition 103 in 1988, already saves hundreds of millions of dollars a year on average for auto and homeowner insurance buyers in the state. In just the first nine years after voters passed Prop 103 in 1988, property and casualty insurance companies had to fork over more than $1 billion in consumer rebates–similar in type to the $3.5 million United Health is paying.

It’s no surprise that the health industry is one of the state’s most powerful political lobbies. It’s no surprise that such lobbying power has killed every effort to pass effective control of health insurance rates in the Legislature. It’s also no surprise that stories like the one above are making voters furious. At least voters, unlike too many politicians, don’t have to do what the health insurance industry tells them to do.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Two years ago, as federal health reform lay on death’s door, CEO Angela Braly, head of Blue Cross’s parent company Wellpoint, spit on beleaguered patients. She sat through poignant Congressional testimony from customers whose lives were being ruined by spiraling premium hikes, then Braly testified that the public outrage was “a triumph of sound bites over substance.”

The CEO’s arrogance and Anthem Blue Cross’s planned 39% rate hike were enough to revive federal reform in the court of public opinion. The federal law passed, but failed to give California the power to reject unreasonable rate hikes.

That’s why, on May 1, one million Californians began paying hundreds of millions of dollars more for their health insurance. It’s a plot right out of Groundhog Day, only it happens every Spring, Winter, Summer and Fall.

Recently Braly, the health insurance world’s Marie Antoinette, was at it again, only in a more intimate setting. On a conference call with shareholders she attacked a pending rate regulation ballot measure in California as unnecessary because she said federal reform was all patients needed. In other words, Braly’s advice for the one million who face a choice between paying for food or health insurance: Let ’em eat cake.

Want to fight back?  The final signatures are being collected in the next couple of days to submit 800,000 signatures for a ballot petition taking power from Braly and the other monarchs of health insurance to raise rates whenever they want without any justification.

Californians can download and sign the ballot petition at JustifyRates.org and vote in November to require Anthem Blue Cross and other health insurance companies to get permission before they raise rates.  But voters have to sign today in order to mail back the ballot petition in time to have theirs’ delivered with the other 800,000 Californians demanding this change.

Health insurance rates are like a runaway train and there’s no police force or firefighting squad with the power to stop them.  Thirty-five states require health insurance companies to get permission before raising rates, but not California.

Patients pay the price.

In Studio City, a self-employed single mom watched her health insurance premium triple over the last decade. On May 1st the price climbed by 16%. She asks,” If I have to get pre-approval from my insurance company every time I want my health care paid for, shouldn’t they have to get approval when they want me to pay more?”

For a decade the legislature has answered no, arguing, exactly as Braly does, that the market and federal health care reform can be trusted to moderate rates.   We can see how well enlightened despotism has worked in health care.

Over the last decade health insurance premiums have shot up 153% — growing five times the rate of inflation (29%). Four companies, including Anthem Blue Cross, control 71% of the health insurance market – competition isn’t in the cards. As a result Californians don’t just move to cheaper plans, they also drop insurance. California has one of the nation’s highest uninsured rates.

Since 2003, the California legislature has refused to pass a law requiring that health insurance companies get approval before raising rates in the same way that auto insurance and home insurance companies have to today.  That insurance company lobbying power is why consumer advocates like myself have joined with Sen. Dianne Feinstein and Insurance Commissioner Dave Jones to qualify the ballot measure that requires health insurance companies to live up to the same standards as other insurance companies.

It’s high time to dethrone Braly and the other health insurance monarchs who are accountable to no patient and no insurance commissioner in the state of California.  They raise rates because they can, not because it’s necessary.  800,000 California voters are about to take on Braly’s “Let ’em eat cake” corporate views.  Act now and you can be with us.

Starting this week one million Californians will pay hundreds of millions of dollars more for their health insurance. It’s a plot right out of Groundhog Day, only it happens every Spring, Winter, Summer and Fall.

Health insurance rates in California are like a runaway train and there’s no police force or firefighting squad with the power to stop them.  Thirty five states require health insurance companies to get permission before raising rates, but not California.

So Hollywood’s fighting back with a short movie trailer preview of an alternative future. This short preview is of the impact of a real ballot proposal – which only needs another two hundred thousand signatures to qualify for the November ballot. With enough signatures, Californians can then decide their own fate and stop outrageous rate hikes.

In Studio City, CA a self-employed, single mom watched her health insurance premium triple over the last decade. On May 1st the price will climb by 16%. She asks,” If I have to get pre-approval from my insurance company every time I want my health care paid for, shouldn’t they have to get approval when they want me to pay more?”

For a decade the legislature has answered no,  following the health insurance industries’ line that the market and federal health care reform can be trusted to moderate rates. Tell that to the million Californians hit with rate hikes on May 1st.

Over the last decade health insurance premiums  have shot up 153% — growing five times the rate of inflation (29%). Four companies, including Anthem Blue Cross, control 71% of the health insurance market – competition isn’t in the cards. As a result Californians don’t just move to cheaper plans, they also drop insurance. California has one of the nation’s highest uninsured rates.

Since 2003, the California legislature has refused to pass a law requiring that health insurance companies get approval before raising rates in the same way that auto insurance and home insurance companies have to today.  That’s why consumer advocates like myself have joined with Senator Dianne Feinstein and Insurance Commissioner Dave Jones to qualify the ballot measure  that requires health insurance companies to live up to the same standards as other insurance companies.

More than 600,000 voters have signed our petition to make health insurance companies publicly justify their rates, as we rush toward the deadline to qualify for the November ballot. The preview of different future isn’t just a Hollywood story. It’s within our sights if 200,000 more Californians sign our ballot measure in the next two weeks.