The Senate Budget Subcommittee on State Administration and General Government considered the budget of the California Department of Insurance (CDI) this morning, including augmentations that would assist in the implementation of some of the insurance regulation legislation passed last year.
Under former Insurance Commissioner Poizner, the Department of Insurance was stripped of staff and budget. Commissioner Jones has requested additional resources, using the Insurance Fund (with no State General Fund impact) to add staff to the department, to work on rate review, insurance review related to rescissions, and other legislative requirements signed into law last year.
One of those requirement is a new rate review measure, SB1163, chapter 661 of 2010, authored by Senator Mark Leno and sponsored by Health Access
The new rate review guidance and regulations under both state and federal law has important roles for both CDI and the Department of Managed Health Care (DMHC). It requires that insurers provide proposed rate increases 60 days in advance, that the departments accept public comment during the 60 day period and that insurers provide substantial evidence to support the rate increases. It also permits the regulators to hold public hearings and to retain actuaries to review any proposed rate increase.
At this time, no insurer and no health care service plan appears to be complying with the law which went into effect on January 1, and covers rate increases on or after that date. Anthem Blue Cross has filed rate increases with DMHC that are effective April 1 and that plainly fail to meet the standards of state law and federal guidance. Both Anthem Blue Cross, as well as Blue Shield, have argued that the law hasn’t gone into effect yet, based on their late 2010 filing.
Both departments need the resources to pursue delinquent insurers who have shown scorn for state law and federal guidance. Both departments will also need resources to meet the new responsibilities of SB1163 to provide scrutiny of all health insurance rate increases for individuals and small businesses as well as unreasonable rate increases for larger businesses.
The sub committee disagreed on the importance of providing the Department of Insurance with adequate staffing and resources to fulfill its rate review and health insurance oversight responsibilities. While Chair Rubio expressed concerns that the request was not enough, Senator La Malfa expressed his hesitation to “prematurely” jump in to implementing “Obamacare”. La Malfa expressed a belief that the health care law in DC was “still taking shape” and protested to moving forward despite Commissioner Jones’ clarification that rate review and insurance oversight by the Department of Insurance were required by new California laws SB 1163 (Leno) and AB 2470 (De La Torre) that were signed by former Governor Schwarzenegger last year. Jones also touched upon the importance of early implementation.
Senator Rubio countered Senator La Malfa’s protests declaring that he felt there was no better use of public funds than to empower the Insurance Commissioner to protect consumers. “That’s good government” he said.
La Malfa voted against resources for DOI related to rate review, recissions, and the Exchange, but the subcommittee approved Commissioner Jones’ budget requests with 2 votes in support from Senators Rubio and Evans. La Malfa voted in favor of the 54 additional positions to support the department’s functions at large and that proposal was approved unanimously.
The corresponding Assembly Budget Subcommittee will soon also review this issue.