California insurance regulator pushes to keep spending minimums at federal levels

California's new insurance commissioner is pushing for health plans' medical spending to stay at minimums set by the health system reform law, no matter what changes Congress or the courts make to it.

Dave Jones said Jan. 3 in his inaugural remarks that he would seek a notice of emergency regulation requiring California health insurers to spend at least 80% of the premiums they collect for individual and small-group policies on patient care and quality improvement. The order also seeks the requirement for large-group plans to be a minimum of 85%.

On Jan. 1, those minimums became law as part of the Patient Protection and Affordable Care Act. But there are congressional efforts to repeal the law, or make changes to it, and numerous court cases seeking to overturn it. With that in mind, Jones said he wanted to make sure that no matter what happens, California residents are assured that insurers' medical spending will stay at its current mandated rate.

For Jones' emergency medical-loss ratio regulation to take effect, the state's Office of Administrative Law must consider whether an emergency exists that requires such regulations. The process allows for a public comment period while the proposed rules are under consideration.

The regulations were submitted Jan. 4 and could be in effect later in the month, said Janice Rocco, deputy commissioner of health policy at the insurance department. The department will seek to make the regulations permanent, which would take at least six months, she said.

Though the regulations are redundant to federal law, she said, "There certainly has been the threat from Republicans to defund the enforcement of the health care reform provision if they can't repeal it. In any case, it's helpful for the state to have enforcement authority."

The California Medical Assn. advocated that medical-loss ratio minimums be part of the health reform bill, CMA spokesman Andrew LaMar said.

"There have got to be some guidelines here so that prices are reasonable and it isn't just a way to skim profits," he said.

The insurance industry in California has not responded as of this article's deadline to the order by Jones, who was elected insurance commissioner after serving six years as a Democratic state assemblyman representing Sacramento. The industry supported his Republican opponent during the 2010 election to succeed outgoing commissioner Steve Poizner, a Republican.

Poizner was best known for taking on insurers over rate increases, even though California does not grant the insurance commissioner the power to accept or reject rate increases. Instead, Poizner used actuarial analysis to determine whether plans followed the state's minimum medical-loss ratio of 70% for individual plans, a number since trumped by the federal health reform requirements.

Such a review -- of WellPoint-owned Anthem Blue Cross' proposed maximum rate increase of 39% in early 2010 -- found mathematical errors that forced the company to resubmit rates, drew company rebuke from the Obama administration and others, and was widely considered the spark that reignited the momentum to enact health system reform legislation.

Jones, who is seeking legislation that would give him authority to unilaterally accept or reject insurers' rate increases, already is fighting with a health plan about what it is charging consumers.

The Los Angeles Times reported Jan. 5 that some Blue Shield customers were facing repeated increases since October 2010, that cumulatively raised their premiums by as much as 59%. Jones wrote to Blue Shield the following day, asking the company to postpone its most recent pending rate increase, set to take effect March 1, by 60 days.

U.S. Health and Human Services Secretary Kathleen Sebelius released a statement the same day, saying in part: "The people of California have a right to be concerned when they see this kind of rate increase month after month. ... The practice of insurers imposing these kinds of rate increases without public scrutiny would be the wave of the future without the Affordable Care Act. If the law were repealed, we would be left with few tools to protect consumers against these kinds of rate increases. Insurers would be able to spend more on profits, marketing and CEO bonuses instead of care."

A company statement from Blue Shield said the planned rate increases "reflect trends that were building long before health reform."

"Our individual market medical costs are rising rapidly due to higher provider prices, increased utilization and the fact that healthier people are dropping coverage during a bad economy."

The statement said the company expects to lose "tens of millions of dollars" on its individual insurance lines for 2010 and 2011. It did not say whether the company would delay the most recent increase, as Jones requested.