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Misguided Insurance Regulation
By: Stuart Waldman

California businesses struggled to stay afloat and keep their workforce employed in the worst economic recession since the Great Depression. Even though the recession officially ended, it doesn’t feel that way in much of California. Job creation remains anemic, leaving more than 2.1 million Californians out of work and struggling to pay their bills and feed their families.

The State of California is slashing funding for schools and other vital programs critical to the neediest in society and to the revitalization of a crippled economy.

In the midst of this hardship comes Assembly Bill 52, a measure that proposes a vast regulatory structure for health insurance that would add to the already high cost of doing business in California and could cause further damage to the state’s struggling economy.  The bill also would limit insurance coverage choices and add millions more to the already-strapped state budget.

AB 52 would give state regulators unfettered power to arbitrarily set premium prices for health insurance. It also would enable almost anyone to file legal challenges in rate-setting proceedings, and it would require health insurers to pay the challengers’ legal fees.

Under AB 52, attorneys would have the power to object to the insurance contracts larger employers negotiate with health plans, adding hundreds of days to the process and costing employers and employees precious time and money. The insurance commissioner could even reject a high deductible plan, forcing employers and employees to purchase lower deductible plans with increased premiums.

Until now, California employers and employees have benefitted from a wide range of coverage options at prices that—in a high-cost state—are around the national average. Only 3 cents out of every $1 in premiums go to health plan profits. As it should be, most of the premium dollar is spent on medical expenses: 87 cents out of every $1 in insurance premiums pay for hospitals, doctors, labs, prescription drugs and other health care costs.

Spending on health care continues to outpace inflation and growth in our nation’s economy, consuming $1 out of $6 generated in the U.S. economy. But AB 52’s arbitrary price controls would apply only to health care premiums—not to the underlying causes of rising costs that drive up premium prices.

AB 52 wouldn’t fix the chronic underpayments for Medi-Cal and other government insurance programs—even though these underpayments and care for the uninsured add as much as $1,792 more per year to the premiums paid by every insured California family.

It would do nothing to address the rapidly rising costs of the nation’s obesity epidemic or other chronic illnesses. Nor would it address the fast-growing cost of new technology, which often improves care but is responsible for about half of the growth in medical spending.

In addition to being costly, AB 52 is simply unnecessary. Employers and employees are already protected by new state and federal laws that limit excess profits and call for rate review. We should give these laws time to work.

For all these reasons and more, more than 60 organizations oppose AB 52, including the California Chamber of Commerce, California Hospital Association, California Association of Health Plans, California Medical Association, Howard Jarvis Taxpayers Association and California Manufacturers & Technology Association.

Creating an unnecessary bureaucracy that increases costs and limits choices is never a good idea. But it’s an especially bad idea when businesses are fighting to keep their doors open and their workforce paid. Working together, we can heal California’s health care system without imposing needless financial burdens and expensive litigation on our state’s employers.

Stuart Waldman is president of the Valley Industry and Commerce Association (VICA). VICA is a business advocacy organization that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.