Top 10 Myths and Facts about California Health

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					                                              Setting the Record Straight
                    Top 10 Myths and Facts about California Health Insurance and Rate Regulation

Four legislative proposals to impose rate regulation on health insurance failed to win passage in the past four years.
Doctors, hospitals and more than 100 groups oppose these arbitrary price controls because of the devastating impact
they would have on patients’ access to quality care. But rate regulation’s tone deaf advocates continue to push for this
seriously flawed concept—relying on the same myths and half truths as in the past. Here are the facts:

                       The Myths                                                     The Facts

    1. Health insurance companies earn excessive            Health insurers have one of the lowest profit margins
       profits.                                             in the entire health care industry.
                                                               •   On average, insurers have a 3% profit margin, compared
                                                                   to the 15.9% profit margin for drug manufacturers and
                                                                   11.6% for medical products and devices.
                                                               •   The annual profits of the United States’ 10 largest
                                                                   insurers would only cover the cost of one day of health
                                                                   care nationwide.


    2. Californians pay more for health care coverage       Even though it’s a high cost state, California’s health
       than people in other states.                         care premiums are at or below the national average.
                                                               •   The average California individual market monthly
                                                                   premium is $157, ranking it second lowest in the nation.
                                                               •   For large group plans, California ranks in the middle—25
                                                                   out of 50 states—and below the national average.
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3. California consumers have no protection against New state and federal laws protect California
   excessive health insurance rates                consumers by limiting health insurance profits and
                                                   requiring rebates.
                                                               •   Newly enacted state law (SB 51) and federal health care
                                                                   reform require 80 to 85 cents out of every $1 in
                                                                   premiums be spent on medical care. If insurers don’t
                                                                   meet these requirements, they will be required to pay a
                                                                   rebate to policyholders.
                                                               •   California law (SB 1163) also requires insurers to explain
                                                                   any rate increase of 10% or more.
                                                               •   The federal government applauded California’s process
                                                                   for reviewing insurance rates, calling it “effective” and
                                                                   saying it complied with the new requirements for federal
                                                                   health care reform.




4. Insurers’ costs are driving up premium prices.          The lion’s share of premiums is spent on medical
                                                           expenses.
                                                               •   87 cents out of every $1 in insurance premiums pays for
                                                                   hospitals, doctors, labs, prescription drugs and other
                                                                   health care costs.
                                                               •   Just 6 cents out of every $1 in premiums pay for
                                                                   administrative expenses.
                                                               •   Another 4 cents goes to consumer services, and the
                                                                   remaining 3 cents are profits.




                                For more information, please visit www.calhealthplans.org.
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5. Californians are at the mercy of the insurance          Employers and the government determine coverage
   industry’s determination of rates, co-pays and          for the 93% of insured Californians who get their
   deductibles.                                            health benefits through their work or through
                                                           government programs, such as Medicare or Medi-Cal.
                                                               •   Employers negotiate premium prices, co-pays,
                                                                   deductibles and the extent of coverage for the nearly
                                                                   58% of insured Californians who get their health benefits
                                                                   through their work.
                                                               •   The government sets the terms of coverage for the
                                                                   nearly 35% of insured Californians who rely on
                                                                   government programs to pay for their medical care.
                                                               •   About 7% of insured Californians get their coverage
                                                                   through the individual market, where premium prices
                                                                   have grown faster because fewer people share the costs.
                                                                   This market will become more competitive under federal
                                                                   health care reform.



6. California must impose rate regulation to               Rate Regulation would jeopardize the successful
   successfully implement federal health care              implementation of federal health care reform.
   reform.                                                     •   It would severely undermine the linchpin of reform, the
                                                                   California Health Benefit Exchange, which will create a
                                                                   new competitive marketplace by negotiating the best
                                                                   rates and plans for individuals and small business.
                                                               •   Rate regulation would effectively give two other state
                                                                   agencies—the Department of Insurance and the
                                                                   Department of Managed Care—the power to veto the
                                                                   Exchange’s insurance offerings by interjecting those
                                                                   agencies into the Exchange’s negotiating and rate-
                                                                   setting process.

                                For more information, please visit www.calhealthplans.org.
                                                                                                                              4



7. Rate regulation would produce savings for              People aren’t cars: The price controls imposed by rate
   health insurance—like Proposition 103 has for          regulation won’t relieve the underlying cost pressures
   auto insurance.                                        that drive up premium prices.
                                                          Safer cars, better-built roads and tougher laws have reduced
                                                          the number of insurance claims and driven down the costs for
                                                          auto insurers. But the underlying costs of health care have
                                                          continued to grow, and rate regulation will do nothing to lower
                                                          those costs.
                                                              • Americans are living longer, leading to bigger medical
                                                                  bills, more insurance claims and higher costs for the
                                                                  management of chronic illnesses.
                                                              • Health care spending continues to outpace inflation and
                                                                  growth in our nation’s economy—adding up to more
                                                                  than $1 out of every $6 generated in the U.S. economy.


8. Rate regulation would help more Californians           Rate regulation would reduce access to health care
   get health insurance.                                  for working families, especially the poorest.
                                                              •   Doctors and hospitals rely on private health insurance to
                                                                  offset the billions they lose treating the uninsured and
                                                                  those with government insurance. Rate regulation would
                                                                  eliminate this cost-shifting, leading to fewer available
                                                                  doctors, less access to them and less time for physicians
                                                                  to spend with patients.
                                                              •   Rate regulation would lead to longer delays in getting
                                                                  emergency care, more emergency rooms closures and
                                                                  even fewer doctors willing to accept Medi-Cal or
                                                                  Medicare because these government programs don’t
                                                                  cover the full cost of treatment.


                               For more information, please visit www.calhealthplans.org.
                                                                                                                                  5



9. The public wants more government regulation             Nearly 7 in 10 voters say less government regulation
   of health insurers.                                     and more competition are the best ways to lower
                                                           health care costs.
                                                               •   69% of people surveyed by the Rasmussen Reports in
                                                                   July and August 2011 said greater free market
                                                                   competition would do more to reduce health care costs
                                                                   than government regulation.



10. Rate regulation would not add to consumers’       Rate regulation would drive up insurance premium
   costs: It would reduce costs, like Proposition 103 prices by creating a new deep pocket for lawyers to
   did.                                               pick and requiring an expensive and expansive new
                                                      state bureaucracy.
                                                               •   Rate regulation would put millions of dollars into
                                                                   lawyers’ pockets—at consumers’ expense—by offering
                                                                   lucrative financial rewards for filing legal challenges.
                                                               •   Consumer Watchdog, the self-anointed consumer group
                                                                   seeking to impose rate regulation on Californians,
                                                                   already collected $6.7 million in legal fees from a similar
                                                                   provision in Proposition 103. It stands to make millions
                                                                   more from an initiative it’s proposed to impose rate
                                                                   regulation on health insurance.
                                                               •   Rate regulation would create expensive and expansive
                                                                   new bureaucracies at the same time the state is trying to
                                                                   cut costs. Official state estimates put the price tag at $58
                                                                   million in the first year alone for a rate regulation
                                                                   proposal that died in the Legislature in 2011, AB 52. In
                                                                   addition to the startup costs, annual expenses for AB 52
                                                                   were expected to be nearly $30 million.


                                For more information, please visit www.calhealthplans.org.

				
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