California Needs to Regulate Health Insurance Rates and Practices--Just as We Did With Auto Insurance 15 Years Ago

[courtesy of California Progress Report]

Prop 103 of 1988 Saves Californians Over $200 Million

Implications in New Study Based on 15 Years of Data is Timely for Health Insurance Bill Up in Committee Today

By Carmen Balber
Consumer Advocate
Foundation for Taxpayer and Consumer Rights (FTCR)

FTCR released a new study this week of California's landmark insurance reform initiative, Proposition 103, that shows that the nation's most effective insurance regulation system has dramatically reduced costs for consumers and provides a model for health insurance reform. The Assembly Appropriations committee considers legislation today (AB 1554 – Jones) that would regulate the health insurance industry ala Prop. 103.

New data reflecting 15 years of insurance regulation under Proposition 103 illustrate clearly that insurance regulation saves consumers money. The price of auto insurance dropped 7% in California between the 1989 implementation of Proposition 103 and 2004. Motorists around the country saw their rates jump by 47% in the same 15-year period. California plummeted from the 2nd most expensive state for auto insurance in 1989, to the 21st spot in 2004. Drivers nationally pay more on average for auto insurance than California motorists. Consumer advocates saved drivers $204 million (and another $596 million to other consumers) using Proposition 103’s to challenge excessive rate increases over just the last four years.

When voters approved Proposition 103 on November 8, 1988, they spoke out against the greed and power of an unfettered insurance industry that was raising rates at will to keep up with the vagaries of the stock market. A product as integral to economic life and financial security as insurance should be overseen by a vigorous regulatory system to protect consumers and ensure fair and reasonable insurance rates.