Governor Brown Signs Bill to Curb Excessive Health Insurer Profits

Today Governor Jerry Brown signed AB 2499 (Arambula) to continue to require that insurers must spend at least 80% of our premium dollars on health care, rather than on profit, marketing, or administrative overhead.
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For immediate release: September 22, 2018

Contact: Anthony Wright, Executive Director, Health Access, 916-870-4782 (cell)
Rachel Linn Gish, Director of Communications, Health Access, 916-532-2128 (cell) 

GOVERNOR BROWN SIGNS BILL TO LIMIT EXCESSIVE HEALTH INSURER PROFITS AND ADMINISTRATIVE COSTS

  • As the Trump Administration aims to lower standards for health insurers, Governor Brown signs AB 2499 (Arambula) to protect the value of coverage for California’s consumers
  • New law will ensure at least 80% of our premium dollars go to patient care rather than overhead.
  • AB 2499 is one of four bills signed today by Governor Brown to protect California consumers from sabotage of our health care system by the Trump Administration and Congress. These bills were prioritized by #Care4AllCA campaign and include SB 910 (Hernandez), SB 1375 (Hernandez), and SB 1108 (Hernandez)

SACRAMENTO, CA — Today Governor Jerry Brown signed AB 2499 (Arambula) to continue to require that insurers must spend at least 80% of our premium dollars on health care, rather than on profit, marketing, or administrative overhead. AB 2499 preserves existing state requirements on medical loss ratio (MLR) calculations that set a floor on how much health plans and insurers must spend on medical care and prevents the state from lowering the standard as the Trump Administration has allowed and encouraged. This new law will also codify Obama-era federal regulations into state statute, which ensures that the Department of Managed Health Care can enforce them.

The Affordable Care Act (ACA) established minimum MLR standards for commercial health care plans and insurers: 80/20 for the individual market; 80/20 for the small group market; and 85/15 for the large group market. On April 9, 2018 the Trump Administration’s Centers for Medicare and Medicaid Services (CMS) published a new final rule that would make it easier for states to apply to adjust their MLR formulas below current standards to as low as 70/30 increasing the amount of money allowed to go to insurance company overhead and profits rather than to medical care.

“As we move forward in improving access to health care in our state, we must also ensure that California insurance companies maintain adequate levels of coverage,” said Assemblymember Dr. Joaquin Arambula, the author of AB 2499. “We are seeing dangerous proposals from our federal administration that would allow these companies to plow more premium money into profits and spend less on patient services. AB 2499 guarantees that California won’t let this happen. We will continue to protect our residents as we strive for better, equitable health care for all.”

“While the Trump Administration continues to seek to sabotage our health system and makes our care less affordable and accessible, AB 2499 protects California’s progress in improving our health care system,” said Anthony Wright, executive director of Health Access California, a sponsor of AB 2499. “We cannot let the Trump Administration lower the standards we hold in California for our health insurers. In our state, insurers have meet and exceeded these higher standards and still continue to make significant profits. With this new law, California once again is showing leadership in protecting patients and our health insurance market, despite federal obstacles.”

AB 2499 is one of five bills signed today that are part of the Care4All California package of bills to protect California consumers from sabotage of our health care system by the Trump Administration and Congress, preserving our state’s progress towards a more affordable, accessible, and universal health care system. The other bills signed today are SB 910 (Hernandez), SB 1375 (Hernandez), SB 1108 (Hernandez), and AB 2472 (Wood). AB 2499 will go into effect on January 1, 2019.

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