LA consumers face 25 percent premium hikes under state healthcare reforms

A bill that changes how health plans handle individual customers in California cleared its first committee hearing Wednesday, under heavy fire from Dave Jones, the state's own insurance commissioner.

Jones told lawmakers the plan could subject consumers to rate hikes as high as 25 percent in greater Los Angeles.

One-and-a-half million Californians currently buy their own health insurance. Another three million individuals will be required to purchase insurance next year when the federal Affordable Care Act takes effect.

To enact those federal reforms, California lawmakers are working on a bill to prohibit companies from rejecting people with pre-existing conditions and to bar them from charging people based on their health.

The bill also allows geography as one factor for companies to establish premium rates. Jones told lawmakers it's important to get the law right.

“The decision you make today, and the decision the legislature makes in this regard, will determine whether or not consumers will be impacted by an up to 25 percent rate increase,” Jones told the Assembly Health Committee.

California’s Department of Insurance analyzed the options for geography-based plans and found that all will produce rate shock for consumers in Los Angeles.

Under a 19-region standard the state adopted last year for small employers, individuals in West Los Angeles would pay 25.1 percent higher premiums. Another six-region plan would push L.A. premiums up by 22.3 percent.

Jones told lawmakers: “There is a better way to do this that will result in less disruption, less rate shock, less rate increases for Californians.”

Jones is pushing an 18-region plan he says would limit rate hikes to eight percent at most.   

Insurance companies see it differently. Charles Bacchi with the Association of Health Plans said, “Our member companies are in the midst of a dramatic transformation of our healthcare market.”

Bacchi said they worked closely with regulators and the state’s new healthcare exchange to develop the 19-region plan for small employers. Bacchi says it only makes sense to apply it to individuals as well.

Covered California — the state healthcare exchange that begins selling individual plans to consumers and employers next year — also supports the 19-region plan.

David Panush of Covered California told lawmakers the agency solicited bids from insurance companies for plans they want to sell on the exchange based on that standard.  Changing it now, he said, would set negotiations back by months.

“This delay jeopardizes our ability to offer qualified health plans during fall enrollment period, and perhaps even in January 2014 when coverage begins,” Panush said.

Assemblyman Richard Pan, the Sacramento Democrat who authored the bill to reform California’s individual healthcare market, told lawmakers final geographic regions are still being negotiated. 

The changes, once enacted, would apply to insurance plans purchased after January 1, 2014.