Health insurance rate regulation advances in California — but will it really hold down premiums?
With the advance this week of California legislation that would subject premiums for health insurance and managed care plans to prior rate regulatory approval, the New America Foundation’s Micah Weinberg correctly notes in a Sacramento Bee op-ed article that regulating insurance rates is a piecemeal solution.
From a logical standpoint, regulating premium rates makes sense insofar as only a handful of insurers and managed care plans control about 90 percent of the market in California. That’s not a robust competitive market that will work to hold down premiums.
Even so, Weinberg correctly suggests, these companies are not the ultimate market makers for health care. Insurance and managed care is a risk spreading and pre-payment mechanism, respectively, that doesn’t ultimately price the cost of health care. Instead, insurers and managed care plans act as intermediaries, passing along the increased costs of health care utilization to their policyholders and members. That’s why they strongly opposed the California rate regulation measure — out of well-justified fear of being squeezed by increasing costs for covering their customers at the same time regulators pressure for lower premiums.
Some states including Maryland recognize this and have responded — as some nations have done — by imposing price controls on medical providers. Weinberg notes Massachusetts is considering legislation that would allow regulators to bar rates charged by hospitals to payers as excessive.