Katharine Mieszkowski

Insurance Commissioner Dave Jones speaking at the Public Policy Institute of California in San Francisco on July 14th.

Dave Jones, California's insurance commissioner, warned Thursday that federal health care reform will lead to even higher insurance premiums unless regulators have the power to reject health insurers' rate hikes. The warning comes as state lawmakers are considering a bill that would give Jones' office that power.

Jones attacked "excessive profit-taking in the industry" during a noontime speech to the Public Policy Institute of California Thursday. He explained that his office has no authority to reject excessive health insurance rate hikes, although it can do so for other types of insurance, like auto and property coverage. He said that authority has saved Californians "tens of billions of dollars" since the late 80s. 

Jones also said that U.S. Sen. Dianne Feinstein and President Barack Obama fought to give states the power to regulate health insurance premiums as part of federal health care reform, but failed to get it included in the law. "Under the Affordable Care Act, we have 'rate review,' which is the authority to review rates, but to do nothing about them," he said. 

Now, Assembly Bill 52 — which would allow the state to not only review rate hikes, but reject them — is winding its way through the legislature. 

On July 6, the Senate Committee on Health voted to send the bill to the Senate Appropriations Committee. Patrick Johnston, president and CEO of the California Association of Health Plans, denounced the bill in a statement, claiming it is "unnecessary because existing state and federal laws already offer consumer protections through rate review and limits on excess profits by insurers."

He added that the bill "simply won't work because it ignores the underlying cost pressures — from the underpayments for government insurance to the rising rates of obesity — that drive up premiums." 

Fearing new regulation, health insurers have been trying to prove that they can curb excess profits themselves. As The Bay Citizen reported, Blue Shield of California recently announced plans to refund $167 million to policyholders and to implement a cap on its yearly profits at 2 percent of revenue.

But millions of Californians seeking coverage under the Affordable Care Act may change the pricing dynamics. 

Federal health care reform will bring health coverage to approximately 5.9 million Californians who do not currently have it, Jones said in his talk Thursday. About 3 million of them will be eligible for Medi-Cal under the new requirements, while others will be required to buy private insurance.

Jones said he fears the requirement to buy insurance without corresponding price controls will drive prices up. "The demand push associated with five new million people is going to create a market dynamic where nonetheless rates will continue to go up."