Larry N. Gerston

Viewpoints: Just say 'no' to rate hikes

Published: Sunday, Mar. 24, 2013 - 12:00 am | Page 5E

"There you go again." That famous phrase was uttered in a debate by presidential candidate Ronald Reagan in response to his perceptions of incumbent Jimmy Carter's mischaracterizations. More than 30 years later, it can just as easily be applied to the latest round of health insurance increases by California companies.

Once again, insurance companies are implementing egregious premium increases, as they have done for the past several years. Once again, they are blaming everything from hospital costs, expensive new technology and even Obamacare for practices they began long before the law. Once again, they are not only deceiving Californians but making it almost impossible to acquire health insurance without extreme sacrifice.

The most recent individual premium increases for 2013 are 11.7 percent for Blue Shield and 11.4 percent for Aetna. Other companies are sure to follow. These increases are hardly anomalies. Last year California's major health insurance companies jumped rates between 8 and 14 percent. And the inflation rates for 2011 and 2012? Three percent and 1.7 percent, respectively. The 2013 inflation rate is estimated to come in at 1.6 percent.

There's nothing new about this practice here or elsewhere. Between 2001 and 2007, health insurance rates rose nationally by 74 percent, or about 12 percent annually. During the five-year period between 1999 and 2004, health insurance industry profits soared from $736 million to $11.4 billion, or 1,620 percent. That's quite a return. The pattern is clear, and it must be stopped.

One might ask, why hasn't the California state insurance commissioner ended this legal thievery? Because his office is not permitted to do so. The best the commissioner can do is try to persuade the insurance companies to reduce their exorbitant rates to intolerable rates. That's small consolation to the consumer.

Something must be done to get control of out-of-control health insurance rates, and help may be on the way. Consumer Watchdog, a California-based nonprofit dedicated to investigating injustices and unfair practices, has qualified for the 2014 ballot the Insurance Rate Public Justification and Accountability Act. If passed, the initiative would require California health insurance companies to justify proposed increases. The new law would also give the elected health insurance commissioner the authority to deny any unreasonable rate increases. Here is where the voters can weigh in on their health insurance costs.

To be sure, such a change will not happen without a huge push-back from the California health insurance industry. Still, this mighty oligopoly has been beaten back at least once before. In 1988, reformers successfully passed Proposition 103, a ballot initiative to gain regulation of automobile, homeowners and medical malpractice insurance practices. Not surprisingly, the insurance industry spent $80 million trying to defeat the measure, but it carried.

Over the next 20 years, Californians saved $62 billion in automobile insurance alone, an average of $1,670 per driver, according to Consumer Watchdog figures. Given this template for success, there's no reason why a similar effort can't succeed again, if Californians can overcome the pending campaign onslaught by the industry.

In America, businesses are entitled to make reasonable profits. When they thrive, we all benefit in one way or another. But there is a difference between thriving and gouging. The California health industry must be put in its place, and we should empower the California insurance commissioner to do just that.

Larry N. Gerston teaches public policy at San Jose State University. His most recent book is "Not So Golden After All: The Rise and Fall of California."

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