EDITORS Contact: Judy Dugan, +1-213 280-0175 (cell), +1-310 392-0522 ext. 305, or Jamie Court, +1-310 874-9989, both of Consumer Watchdog

Consumer Watchdog Says Average 15% Rate Could Still be Excessive Under Proposed 'Prior Review' Rate Regulations

SANTA MONICA, Calif., June 30 /PRNewswire-USNewswire/ -- Anthem Blue Cross of California, under fire for substantial math errors in its proposed health premium increases averaging 25%, has made the minimum possible reduction in reissuing its proposed increases, said Consumer Watchdog. The new policy increases average 15%, with a maximum increase of 20%. The decrease, while substantial, does no more than account for the gross calculation errors found by an independent examination of its original rate increase, said the group.

The Blue Cross errors, and similar ones discovered more recently in Aetna rates, show exactly why California needs regulations to require that regulators review health insurance rates before they go into effect, said Consumer Watchdog. A bill sponsored by state Sen. Dave Jones and Assembly member Mike Feuer (AB 2578) would institute such 'prior review,' and could reject unreasonable rates before they went into effect-every year and for every company. The bill, however, faces strong insurance company lobbying in the Senate, and a possible struggle to gain the signature of Gov. Arnold Schwarzenegger.

"Examining and controlling health insurance rates needs to be the law, not a one-time favor to consumers," said Judy Dugan, research director of Consumer Watchdog. "Since outside actuarial reviews of health rates in California have not been conducted before, no one can say how long these 'mistakes' in the insurers' math have been cheating policyholders of up to thousands of dollars a year. The Department of Insurance should also examine previous years, publish the results and hold insurers to account."

Consumer Watchdog noted that if customers had not demanded help from the state, the original increases would have sailed through without examination. No assessment of health insurance rates is required in California, unlike with auto and homeowner insurance.

Since the passage of Proposition 103 in 1988, property and casualty insurance rates must be approved by the Department of Insurance before they go into effect, and consumers can formally challenge rates. Since the measure's enactment by voters, drivers have saved over $60 billion dollars. California also has highly competitive and still profitable auto and homeowner insurers.

"After this whole episode, where we found that health insurance companies can't even be trusted with a calculator, getting the rate regulation bill passed should be the Senate's highest priority," said Dugan. "The question is whether the insurance lobby's money is still powerful enough to kill such evidently needed regulation."

SOURCE Consumer Watchdog

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