Is California leading states in health care reform?
David Axene provides his perspective on health reform in California.
by David Axene, President & Consulting Actuary, Axene Health Partners
Some have said yes and others say no. So what do I think? Having been hired by the former insurance commissioner last year to review several individual insurance rate filings, the most notable the Anthem Blue Cross filing, I have an interesting firsthand perspective. First of all, this was the first time I recall an Insurance Commissioner taking such a public and highly visible approach. Perhaps the negative publicity of a carrier in his state, perhaps tied to his then run for the governor’s office, perhaps a serious concern for insureds, but for sure an interesting approach. Some have even said that California might have been responsible for the urgency to pass health care reform legislation.
You see the insurance commissioner in California has no serious ability to stop rate increases other than through public embarrassment. California has utilized the 70 percent lifetime loss ratio test for individual rate filings. This is a reasonable approach but not one that gives the Commissioner meaningful authority. As long as the carrier shows it meets the test and they can find an actuary willing to sign it, the review is limited to arguments and public embarrassment. Carriers notify and then proceed. In the past year another external review by outside consulting actuaries is required prior to submitting the rate filing. The commissioner wants more authority and has recommended the passing of Assembly Bill 52 which, if passed, empowers the commissioner to do much more. Other states have more controls in place, but if AB52 passes it will give the California insurance commissioner considerable power, potentially retroactive reviews of prior rate increases.
California has also passed other regulations which implement many of the provisions of PPACA that will not be mandatory until 2014 (e.g., no gender-specific rates). So in some situations, California is ahead. One thing for sure, California leads the way in implementing a relatively less friendly environment for the health plans. At times it seems as though no one really cares about the underlying reasons for health insurance rate increases. When the underlying health care costs increase, it seems reasonable to assume that premium rates will have to increase. No one seems to be looking at the providers and their impact on premium rates. Everyone wants to assume that the health plans are the bad guy.
California with more than 10 percent of the U.S. population is very noticeable, but I am not sure it is ahead of the other states. Publicity is not a prerequisite for insight and forward thinking. California residents definitely have health care concerns. Local health plans are tempering their aggressiveness when setting rates, unfortunately to the point that financial losses may emerge. Some have deferred rate increases, some have limited them, some have corrected them. Bottom line, there seems to be good tension between the regulators and the health plans. Maybe that is leading the pack!
So what do you think? Is your state ahead of California?