Each time Californians purchase homeowners insurance they are protected from the insurance company unreasonably raising their rates. This provides the economic predictability homeowners need to budget for their mortgages. After decades of soaring premiums, every Californian who buys health insurance needs the same assurance homeowners have, so they won’t be held hostage to unfair rate increases. The state Senate has a chance to send a bill to Gov. Jerry Brown’s desk that could give California’s health insurance policyholders similar peace of mind.
Small businesses in particular deserve to reap the benefits of this type of protection, as they’ve faced years of double-digit and even triple-digit rate hikes. The California Senate can help mitigate these unfair cost increases by passing AB 52, a bill the Assembly passed on June 2 that would give the state the power to prohibit any rate increase from being approved or remaining in effect if it is found to be excessive. The Senate Health Committee, which will vote on the bill on June 29, should pass this bill onto the full Senate so they can in turn send it to Gov. Brown to be signed into law.
Exorbitant health insurance premiums have been cutting into California entrepreneurs’ profits for years. Small Business Majority conducted an opinion survey of California small business owners that found 86 percent of those who don’t offer health benefits to their employees can’t afford to, and 70 percent of those who do offer it said they are struggling to do so.
Several factors lead to rising health costs, which is why federal healthcare reform includes provisions aimed at lowering small businesses’ healthcare expenses. Reforms such as state health insurance exchanges will allow small employers to band together to purchase insurance at lower rates, and requirements that insurers spend more money on patient care and less on administrative costs also takes aim at soaring premiums. Additionally, the Affordable Care Act created a process where state health insurance regulators will review rate increases before they’re enacted. However, if the regulator finds a rate increase to be unfair or excessive, states currently lack the power to stop the rate increase from going into effect. AB 52 gives the federal law some teeth by ensuring this won’t happen in California.
Critics of AB 52 have argued that it will cause insurance companies or healthcare providers to pack their bags. The chance of these companies leaving the state is minimal, especially given the size of California’s market, along with the record profits that insurance companies are making and our pressing healthcare needs. Others have raised a legitimate concern that handing regulators the authority to nix price hikes risks politicizing and oversimplifying the complex issue of healthcare costs. Yet recent amendments to AB 52, which we support, satisfy some of these concerns, including requiring California’s insurance regulators to determine whether the proposed increases are actually based on underlying healthcare costs. As currently written, AB 52 strikes a balance between the need to address unsustainable cost increases and having a vibrant, competitive health insurance marketplace that serves the needs of California’s small business community.
AB 52 is not the be-all end-all for stemming skyrocketing health insurance premiums, but it’s a step in the right direction. With that said, California’s policymakers should continue exploring other ways to lower healthcare costs through initiatives such as payment and delivery reform, a focus on prevention and wellness and the implementation of a robust healthcare exchange. A combination of these measures will greatly expand on the benefits healthcare reform provides to small employers.
California is known as a national leader, not just on healthcare reform but with many policies that safeguard small businesses. Lawmakers in Sacramento should continue this tradition by enacting this commonsense measure.
John Arensmeyer is the founder and CEO of Small Business Majority