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Auto rates and health insurance?

By Jay MacDonald ·
Tuesday, December 3, 2013
Posted: 6 am ET

There's a behind-the-scenes cat fight underway between auto insurance companies and consumer groups that could one day have an impact on your health insurance rates.

A new report from the Consumer Federation of America set the fur flying. It shows that U.S. car insurance rates have risen 43 percent over the past quarter century, despite improved auto safety and increased competition from new insurers entering the market. Rates in Wisconsin, the median state, rose 56 percent, while those in Nebraska more than doubled, increasing 108 percent.

California singled out

Not exactly fighting words, or even particularly surprising, I'll grant you. But CFA went on to laud California for its approach to auto insurance rate regulation, which requires insurers to obtain prior approval from the state insurance commission before imposing rate increases on home and auto policyholders. In fact, the Cali regulations go one step further by enabling consumers who challenge auto rate hikes to be compensated for their trouble. Coincidentally, the reforms were adopted in 1988, exactly a quarter-century ago.

As a result, CFA says auto insurance rates for California drivers fell three-tenths of 1 percent during the 25-year period, compared to the double-digit increases common nationwide. The consumer group called on all states to adopt California's regulatory model, strongly implying it was directly responsible for flat rate growth over a quarter century.

The Insurance Information Institute says just 13 states require prior approval for auto rate increases, while 37 states and the District of Columbia allow insurers to set some auto rates without state approval.

Where health insurance comes in

The Property Casualty Insurers Association of America immediately rebutted the "misguided impression" that prior approval keeps rates in check. PCI says it was other factors, including tort reform, anti-fraud campaigns, stronger DUI laws and market competition, that kept California's rates so low.

Why has this perennial regulation-versus-competition debate resurfaced now? Short answer: Because Consumer Watchdog, the group that spearheaded California's auto insurance regulations, has placed an initiative on the 2014 ballot to require prior approval for health insurance increases as well. What's more, California Insurance Commissioner Dave Jones has endorsed the measure.

California, the nation's most populous state, has long been the cradle of populist reforms. That said, even the head of Consumer Watchdog admits, "It's going to be another David vs. Goliath battle at the ballot box."

Health insurance already under scrutiny

Unlike California, most states already have prior approval over health insurance rate increases. Although where they set the bar varies considerably. That's one of the reasons the Affordable Care Act in September 2011 made mandatory that states scrutinize any proposed annual rate increase of 10 percent or more.

Whatever California voters ultimately decide, any seeds of a public movement toward nationwide prior approval of health insurance rates may help temper the stubborn upward spiral of health insurance costs in America.

Follow me on Twitter: @omnisaurus.

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1 Comment
December 05, 2013 at 6:15 pm

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