Dramatic expansion in health care rules pronounced dead

A measure granting state regulators more control over the rates health care plans charge has stalled in the Senate, ending its chances for passage this year.

It’s the second high-profile Assembly bill in as many days to be blocked by the upper house. Assembly Speaker John Pérez’s measure to unincorporate the City of Vernon was defeated Aug. 29.

That’s how things go in the hurly-burly, up-and-down, back-and-forth of the final days of the Legislature’s annual session, which, this year, ends Sept. 9.

Benign, non-controversial bills are gutted, replaced with vehicles to accomplish the end of some interest group or lawmaker who knows that the sole chance for passage is avoiding the scrutiny of the normal legislative process.

Hundreds of bills are approved in a matter of hours. Tempers fray. Decorum fades.

And bills die.

One year of goading and compromise erased with a single vote – or lack thereof.

“Right now, not enough Senators are prepared to vote for any form of health insurance rate regulation,” said Assemblyman Mike Feuer, a Los Angeles Democrat, in an August 31 email to backers of his health insurance bill.

“Until a majority of the Senate supports giving the state authority to reject excessive health insurance increases, millions of Californians will continue to pay unreasonable rates or not be able to afford to go to the doctor at all.”

And his bill, AB 52, will stay parked on the Senate floor.

Feuer’s health care regulation measure would allow the state Insurance Commissioner and Department of Managed Health Care, which regulates health maintenance organizations, to deny, approve or modify rate increases sought by health care providers.

Currently, proposed rate hikes are filed with the state. Consumers are given 60-day notice of the increase while the state examines the proposal to see if it’s “unreasonable.”

Federal law stemming from 2010’s Patient Protection and Affordable Care Act requires 80 cents of every $1 charged by a health insurer to small businesses or individuals be spent on medical care. The remainder can pay for administrative costs.

Because HMO plans can cover hundreds or thousands of private or public sector employees, there are greater economies of scale so the medical care spending mandate is higher: 85 cents on the $1.

If state regulators find the rate increase unjustifiable they can declare it “unreasonable” but cannot stop the insurer from imposing the increase.

“Sentenced to my website,” is how Insurance Commissioner Dave Jones, a supporter of stiffer rate regulation, routinely puts it.

In the face of nearly 100 opponents including the rarely allied state’s doctors, hospitals and HMOs as well as the governor’s Department of Finance and two public affairs firms trumpeting the measure’s deficiencies, passage of Feuer’s bill was – and still will be next year – a near vertical climb.

That’s a fact Jones knows from personal experience.

Last year, as an Assemblyman, Jones carried a bill designed to accomplish the same thing as Feuer’s. It was killed in the final days of the session.
Déjà vu all over again for Feuer:

“Despite an outpouring of strong support from small business, working families and consumers throughout California, the bill has hit a temporary roadblock in the Senate,” Feuer told the bill’s backers.

Said Jones, whose political profile would increase markedly from appearing to thwart supposedly rapacious health insurers:

“First and foremost, AB 52 is still alive. Over the next couple of months, we intend to continue mobilizing Californians to communicate their support for AB 52 to state Senators in advance of the legislative session resuming in January.”

No doubt the bill’s opponents, led by the California Association of Health Plans, will be using the time to remind senators of their continued opposition.

“Do you want a competitive market where consumers can shop for price and quality or have a regulator set the price based on what the regulator thinks is reasonable without any clear standard of what exactly that is?” asked Patrick Johnston, the former state lawmaker who heads the association of health plans.

Doctors, who aren’t exactly kissin’ cousins with HMOs, also opposed Feuer’s bill fearing that artificial “caps” on rates for private insurance would force insurers to reduce reimbursement rates to the physicians they contract with.

California already has some of the lowest indigent care reimbursement rates in the country for doctors and hospitals who treat patients under Medi-Cal, the state’s health care program for the poor.

Opponents were not circumspect in their statement responding to Feuer’s decision to hold his bill for the year:    

 “AB 52 hit a major roadblock because it was deeply flawed. Diverse interests, including doctors, hospitals, business, government, agriculture and many others, joined together to defeat AB 52 because rate regulation is bad policy. This misguided concept hurts patients, businesses and limits access to care.”

If Johnston and his association don’t like Feuer’s proposal, they’re really going to loath the ballot proposal being drafted by one of AB 52’s supporters.

Not only would the initiative tighten state regulation of premium increases but it would also require a 20 percent rollback of existing rates.

“We’re preparing an initiative to be ready to go on health insurance reform if we’re not able to get satisfactory results in the Legislature,” said Doug Heller, executive director of Santa Monica-based Consumer Watchdog, a group created by the backers of 1988’s Proposition 103, which increased regulation of auto insurance rates and demanded a 20 percent rollback.

The death of Assembly Speaker Pérez’s bill on Vernon earlier in the week came from a combination of good lobbying and strategy by the city, a lack of legislative experience on Pérez’s  part and opposition to the measure by the state senator representing the district.

Last week, the Vernon City Council approved a “reform” plan by Sen. Kevin de Leon, a Los Angeles Democrat, that was framed by him and the city as an alternative to the disincorporation of Pérez’s bill.

The initial vote in the 40-member Senate for Pérez’s bill yielded 13 “aye” votes.

“I introduced (my bill) to finally end the toxic corruption that has poisoned the Southeast Communities by disincorporating Vernon,” Pérez said in a statement. “The Senate chose to ignore decades of corruption in Vernon … and (has) given Vernon a free pass to continue doing business as usual.”

Like Feuer, Pérez’s has a second shot at passage next year – should he choose to exercise it.