Consumer Watchdog calls Obama Administration and Congress to adopt California's insurance rate regulation

The consumer group that pioneered the most successful insurance premium regulation law in the nation, California's Proposition 103, today said only the extension of such "prior approval" regulation to health insurance can begin to make insurance affordable in the wake of double digit premium increases that have dramatically out-paced wages.

Today, President Obama is expected to announce a health insurance premium rate regulation proposal in the wake of Anthem Blue Cross's recently announced 39% rate hike. Anthem Blue Cross is the California subsidiary of the nation's largest insurer, WellPoint Inc.

The President's proposal would create a Health Insurance Rate Authority which will "provide needed oversight at the Federal level and help States determine how rate review will be enforced and monitor insurance market behavior." Furthermore, "if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable." However, the proposal outline does not provide detail of whether the review would occur before the rate increase is mailed to consumers or what facts would be considered to determine if the rate is "unreasonable and unjustified."

Consumer Watchdog has called on the Obama Administration and Congress to adopt California's insurance rate regulation that requires prior approval of rate increases, allowing an elected insurance commissioner to reject rates deemed excessive, inadequate, or unfairly discriminatory. Unlike other rate regulation, "prior approval" allows an insurance commissioner to review and reject rates before they are passed on to the consumer.

"California's prior approval rate regulation is the nation's most successful insurance regulation and is a model for health insurance reform. Prior approval is a time tested and successful model to restrain rampant insurance company profiteering and waste," said Jerry Flanagan, health policy director of Consumer Watchdog.

California's Proposition 103 prior approval rate regulation has saved drivers in California $62 billion on auto insurance rates since 1988, and similar savings would be expected for health insurance rates. Since 2003, Consumer Watchdog has saved $1.7 billion by challenging unnecessary premium increases using Proposition 103's public intervention process.