Prop 45 Facts
Federal health reform requires Americans to have health insurance or pay a fine. But skyrocketing health insurance costs are making health insurance increasingly unaffordable. Health insurance companies in California can raise rates at will on this captive market. Proposition 45 will stop these abuses.
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What does Prop 45 do?
It requires health insurance companies to publicly disclose and justify, under penalty of perjury, proposed rate changes before they take effect. It also:
Requires public hearings on proposed rate increases
Gives Californians the right to challenge excessive and unfair premium rate increases
Prohibits health, auto and home insurers from considering Californians’ credit history or prior insurance coverage when setting premiums or deciding whether to offer coverage
Gives the insurance commissioner authority to reject unjustified rate increases
Why do we need to regulate health insurance rates?
The cost of health insurance is becoming increasingly unaffordable for California families, but there’s no transparency in how health insurance companies set their prices and no way to stop unjustified increases.
Health insurance premiums in California have increased 185% since 2002; that's 5 times the rate of inflation
Five health insurance companies - Kaiser, Anthem Blue Cross, Blue Shield of California, Health Net and United Healthcare - control 88% of California’s health insurance market and set their premiums behind closed doors
Do other states regulate health insurance prices?
Yes. At least 35 other states require health insurance companies to justify rate increases and get them approved by the state insurance regulator before they take effect.
What happens now in California when a rate increase is excessive?
Nothing at all. This year, one insurance company raised rates as high as 19.9% for almost 270,000 Californians, despite the fact that the state insurance commissioner found that the rate increase was excessive. The insurance commissioner had no authority to stop the excessive rate increase.
Marti Conger, a disabled woman who was self-employed for many years and saw her rates jump up 15.6% this year on top of a 346% increase from 2005 to 2012, had to sell her home recently to keep up with the cost of health care. She described the plight of many when she said, “I am really struggling. After food and housing and a few necessities my income basically goes to health insurance and health care."
Sure health insurance rates are too high, but can regulation really hold down premiums?
Yes. California voters approved an insurance reform law called Proposition 103 at the ballot in 1988. That law requires auto, homeowners and other business insurance companies to open their books, publicly justify and win approval for rate increases. Prop 45 simply applies the same rules to health insurance.
Rate regulation has saved California drivers over $100 billion on their auto insurance premiums (Consumer Federation of America)
California is the only state in the nation where auto insurance premiums have actually gone down over the last 25 years. In contrast, auto insurance premiums nationally have increased an average 43%
Proposition 103 has also fostered healthy profits for the insurance industry and California is the fourth most competitive state for auto insurance in the nation
So why isn’t this already the law?
Lawmakers and consumer groups have proposed legislation to require health insurance companies to justify their rates every year for the last decade. But the health insurance companies and their lobbyists have a stranglehold on Sacramento. Health insurers gave $11.6 million in campaign contributions to legislators in California since 2000. The majority of that money went to lawmakers who voted against reform. The Insurance Rate Public Justification and Accountability Act gives voters a chance to decide because the legislature has refused to act.
If you lower health insurance prices, won’t it mean that insurers will just pay for less medical care?
Not at all. Insurance companies are supposed to include the price of medical care in premiums. They won’t be able to include things like excessive profits, exorbitant executive salaries and wasteful overhead. It prohibits health insurance companies from passing on things like excessive CEO salaries, lobbying expenditures and campaign contributions, to consumers in their premiums.
The initiative forces insurance companies to cut waste and excess. They’ll still have to pay for medical care.
What else does the initiative do?
The initiative applies the provisions of California’s existing insurance reform law to health insurance companies. That includes rules about fair pricing – if Californians have to buy insurance, we should make sure it’s affordable and priced fairly.
To make sure insurance prices are fair, the Insurance Rate Public Justification and Accountability Act bans auto, home and health insurers from using your credit score, or the fact that you didn’t have insurance before, to raise your rates or deny you coverage.
- Download and read the Fact sheet about the Insurance Rate Public Justification and Accountability Act.
- Read the text of the Insurance Rate Public Justification and Accountability Act.
- Read about the success we've had in the past when campaigning for insurance reform.
- Read the stories of California patients who are paying exorbitant premiums for their health insurance.
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