Commissioner Jones Responds to Federal Government Announcement of New State Grants for Health Insurance Rate Review

by Marina Karvelas

In a press release issued today, California Insurance Commissioner Jones applauded the U.S. Department of Health and Human Services after it announced the availability of roughly $200 million in new health insurance rate review grants

Specific funding is available to support states in their efforts to stop excessive premium increases from being implemented. However, California would not be eligible for this portion of the grant because California law currently does not empower the Commissioner to reject excessive health insurance premium increases.

As discussed earlier in this blog, Commissioner Jones recently issued Guidance 1163:2 which allows the Commissioner to determine, based upon a list of factors, including a federal medical loss ratio, whether a health insurance premium rate increase is “unreasonable”.

The Commissioner however has no power to reject an "unreasonable" rate increase.  

Commissioner Jones is actively supporting legislation that would give him such power and the new federal grants gives him yet another platform to do so.

While California is eligible for some of the grant funding through this program, we would be eligible for more federal funding if California law provided the Insurance Commissioner with the authority to reject excessive premium increases. This again brings to light the need to change the law and provide the Insurance Commissioner with that authority. I am working with Assembly Member Mike Feuer to pass AB 52, which would give me the authority to reject excessive health insurance premium increases." 

We will follow AB 52 and the Commissioner's efforts to reform health insurance rate regulation.

Concerned About Excessive Rates, California Insurance Commissioner Requests Rate Filings from Medical Malpractice Carriers

On February 17, 2011, California Insurance Commissioner David Jones announced in a press release that the California Department of Insurance had contacted several unnamed medical malpractice insurers to raise concerns about excessive rates and request that these insurers submit rate filings with the CDI to reduce their rates. 

California Insurance Code sections 1861.01 and 1861.05, enacted in 1988 as part of Proposition 103, specifically grants the CDI the authority to regulate the rates of certain property and casualty lines of insurance, including medical malpractice insurance. It requires these insurers to apply to the CDI for prior approval of rates and prohibits the use of excessive rates. 

The CDI noted in its press release that it has employed these provisions in the past to regulate the rates of medical malpractice insurers, including reducing rate increases. 

In contrast, the CDI specifically confirmed that it does not have the authority to reject rates from health insurers that it deems excessive or unreasonable, as health insurance is not subject to California Insurance Code sections 1861.01 and 1861.05.

In his announcement, Commissioner Jones noted that the basis for the CDI’s determination that medical malpractice rates might be excessive is the low loss ratios that these medical malpractice insurers experienced. 

In the CDI’s view, low loss ratios are an indication that premiums might be excessive and in violation of the law. 

The CDI plans to require a rate filing from those medical malpractice insurers it believes have excessive rates and review the rate filings to ensure that the rates comply with the aforementioned provisions of the California Insurance Code as well as all other applicable provisions of the law.