Lawmaker: Regulate health costs

PROPOSAL TO HAVE STATE SET RATES FACES TOUGH GOING

SACRAMENTO - As Gov. Arnold Schwarzenegger and state lawmakers work to repair California's health care system, one of their most daunting tasks is figuring out how to rein in runaway costs. Over the last six years health premiums have swelled nearly 90 percent for a typical family of four, which can expect to shell out about $3,000 every year for insurance - and that's if it's provided by an employer.

Convinced that the leading reform plans would fail to tame those spiraling expenses, a state legislator Wednesday proposed a simple, if controversial, solution: Give government the power to regulate health care rates, much like it does car insurance premiums.

"The missing piece" from the major reform plans, Assemblyman Dave Jones, D-Sacramento, said at a news conference, "is any sort of assurance that premium costs for health insurance will be affordable. It's a striking omission and it's something that needs to be addressed."

Jones' AB1554 would force health insurers to get approval from state regulators in order to raise premiums, deductibles or co-payments. His proposal is modeled after a landmark 1988 ballot initiative, Proposition 103, that created a rate-regulation program for auto insurance. Jones and consumer advocates said that measure has kept auto insurance premiums down even as insurance companies prospered.

But his bill, backed by the Foundation for Taxpayer & Consumer Rights and other consumer advocates, may find little support in the Legislature. An aide to Schwarzenegger said the governor favors other ways to contain costs, such as promoting early treatment of disease and encouraging people to live healthier. And neither Democratic leader in the Legislature - Assembly Speaker Fabian Nu`ñez, D-Los Angeles, nor Senate President pro Tem Don Perata, D-Oakland - included rate regulation in their reform plans.

Nu`ñez and Perata's offices did not respond to requests for comment.

The bill also faces stiff opposition from the health insurance industry, which spends millions on political donations and lobbyists and has significant clout in the Capitol. Insurers argue that regulating rates does nothing to fix the underlying reason for higher premiums - rising medical costs.

"There is no connection between rate regulation and improving health care affordability," said Christopher Ohman, president and chief executive of the California Association of Health Plans.

But some question whether excessive profits among health care companies are also to blame for the growing share of budgets families and businesses are devoting to health insurance.

Jerry Flanagan, the health care policy director for the consumers and taxpayers group, said that Jones' bill would give regulators more power to scrutinize how insurers are spending premium dollars, and decide whether rate increases are justified. He said the consolidation of the health insurance market in California - recent corporate mergers have left five companies in control of 80 percent of the health-maintenance organization market - demands a bigger role for government.

"Traditionally when markets collapse," Flanagan said, "government steps in to regulate prices and inefficiencies in the market."

The bill is scheduled for its first legislative hearing Tuesday in the Assembly Health Committee.

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Contact Mike Zapler at mzapler@mercurynews.com or (916) 441-4603.

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