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If you're looking for a model plan to save money on health insurance premiums, Senator Dianne Feinstein joined Consumer Watchdog yesterday to release a new Consumer Watchdog report, Health Reform and Rate Regulation: Can't Have One Without The Other, showing how insurance company rate regulation is crucial to lowering rates.

In addition to empowering insurance commissioners to review and reject excessive premiums, the report points to the importance of the consumer intervention system of California's Proposition 103 in achieving savings.  Proposition 103, which applies to property-casualty insurance like auto and home insurance, requires insurance companies to pay the costs incurred by consumer representatives who fight excessive rates proposed by insurance companies.

Since 2003, our nonprofit organization has challenged the proposed rates of nearly 30 auto, home and medical malpractice insurance companies in California, and these challenges have saved Californians over two billion dollars ($2,000,000,000).  When Consumer Watchdog has intervened to stop insurance company price gouging, the company ended up charging consumers less than it originally proposed.  In many cases insurers that wanted to hike premiums were forced instead to lower their rates after our challenge.

Over the years we've forced some big name companies to charge consumers much less than they wanted to.  Among the $2 billion in savings for Californians are:

  • $258 million on Allstate auto insurance
  • $231 million on State Farm auto insurance
  • $168 million on Farmers auto insurance
  • $118 million on Mercury auto insurance
  • $340 million on Allstate homeowners insurance
  • $95 million on Safeco home and earthquake insurance

Of course, the industry rarely rolls over and agrees to charge consumers a fair price.  They fight.  They hire actuaries, economists, and lots of lawyers.  To beat back insurance company greed, our organization (and others that have challenged excessive rate proposals) put hundreds and sometimes thousands of hours into these battles.  To compete with the companies' resources, we have had to hire our own actuaries and economists – we've even hired a geologist to prove insurers were trying to stiff Californians on earthquake rates. 

Fortunately, under California's insurance reform law Proposition 103, insurance companies can be required to reimburse consumer advocates and their outside experts to take on these rate hikes. 

You know what it takes to beat back $2 billion of insurance company greed?  About $5 million worth of legal and actuarial expertise, according to our experience.  

As Politico is reporting, the insurance industry is calling into question the value of having a system of intervenors that can get reimbursed when they help fight off rate hikes. Not much of a surprise there. (Politico's reporting is incomplete and overstates how much Consumer Watchdog has received for rate challenges by several million dollars.)

The insurance industry hates the fact that we can go in and open their books and force their rates down.  For those $2 billion in savings, insurers have had to reimburse Consumer Watchdog about $5 million, of which about half went to the independent experts we hire to counter the arguments by the insurance companies.

That's $100 in consumer savings for every twenty-five cents (25¢) it costs us.  Not a bad return on investment. 

This year, health insurance companies are trying to block a California proposed law – AB 52 (Feuer) – which would apply similar rate regulation rules to health insurance companies that Proposition 103 applies to auto, home and other property-casualty insurers. 

Among the reforms offered by AB 52 is a system of public intervention like Proposition 103, and the insurance companies are desperately trying to block it.  They hope that attacking our organization for getting reimbursed over the years will help their selfish cause.  But that brings us back to the financial return Californians have earned on this intervention investment over the years. 

Ask anyone if it's worth spending a quarter to save a hundred bucks and I think they'll agree that the $5 million in expert and legal costs we've recouped over the years is well worth the $2 billion in premium savings Californians have seen on their insurance bills.