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We Can’t Let Them Rewrite History to Defeat AB 1554--Health Care Rate Regulation--on Eve of Assembly Vote
By Jerry Flanagan
The Foundation for Taxpayer and Consumer Rights (FTCR)
In an attempt to derail the health care rate regulation in AB 1554 (Jones), Blue Cross and Kaiser have begun claiming that seat belts, air bags and drunk driving laws are the reasons for California's phenomenal savings in auto insurance premiums, not the nation's most effective insurance regulation under Proposition 103.
Seat belts and air bags are common throughout the country, and drunk driving is illegal in every state, but only California has seen auto insurance rates decrease since 1989 when Proposition 103 was approved by voters, while average rates rose across the nation.
Proposition 103 has saved California motorists money:
- California auto insurance rates decreased 7% between 1989 and 2004 while average national rates increased 47%.
- Prop 103’s provisions have saved drivers $23 billion, as reported by the Consumer Federation of America.
- California was the 2nd most expensive state for auto premiums in 1989 and fell to 21st by 2004.
- Consumer interventions in rate proceedings have blocked unnecessary rate hikes and lowered excessive rates, saving drivers $204 million (and doctors and homeowners another $596 million).
Regulation has kept premiums low and insurers prospering in California. It is absurd to credit seat belts and DUI laws – which are in place across the country – for the achievements of Proposition 103 in California. The public will see through the HMOs’ empty claims, and any politician who tries to hide behind them to block health insurance rate regulation.
Consumer premiums that are wasted by health insurers and HMOs will be reined in by AB 1554:
- Kaiser has $10 billion in reserves in the bank – 1000% the state’s requirement – that are all funded with consumer premiums.
- Blue Cross transferred nearly $1 billion in profit, also paid with consumer premiums, to its out-of-state parent company.
California’s insurance industry is profitable and competitive because Prop 103 guards against inadequate, as well as excessive and discriminatory rates.
- California is more profitable for insurers than the national average for virtually all lines of insurance regulated by Prop 103. The 10-year average profitability, 1995-2004, is:
* Personal auto insurance: 11.1% in California vs. 8.5% nationally
* Homeowners insurance: 11% vs. 3.4% nationally
* Farmowners insurance: 8.7% vs. 2.4% nationally
- Over 200 companies sell auto insurance in California, 100 sell homeowners policies, nearly 40 sell medical malpractice insurance.
Legal limits in California had no effect on auto insurance premiums that wasn’t also felt across the country:
- 25 states have restrictions similar to California’s on third party lawsuits. Since Proposition 103 was enacted, every one of those states saw rate increases except for California according to data provided to the National Association of Insurance Commissioners.
- Limits on pain and suffering compensation for uninsured drivers did not go into effect until the late 1990s – well after Prop 103’s approval and California’s premium decreases were evident.
The Foundation for Taxpayer and Consumer Rights (FTCR) is California's leading nonpartisan consumer advocacy organization. For more information, visit the website http://www.ConsumerWatchdog.org
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