By Garry Maisel

At Western Health Advantage, we have worked with local community members, business owners, doctors and hospitals for the past 12 years to find ways to streamline costs and ensure affordable access to care for the region. The results have been high patient satisfaction and more affordable premium options for our clients.

We have been able to accomplish this because we’ve had the ability to remain flexible and to adapt our plans and coverage to reflect the underlying costs of care happening locally.

Unfortunately, a misguided bill being considered by the Legislature — AB 52 — will significantly and adversely hamper this ability.

Consumers and employers are understandably concerned about the rising cost of health insurance, but this bill will do nothing to address the underlying pressures that are driving up premiums. The vast regulatory structure proposed by AB 52 will end up costing California millions, result in reduced access to care and limit insurance coverage choices.

Until now, California employers and employees have benefited from a wide range of coverage options at prices that — in a high-cost state — are around the national average. Of every $1 in premiums, Western Health Advantage operates with a very slim half-cent operating margin and, industrywide, 3 cents out of every $1 goes to health plan profits. As it should be, most of the premium dollar is spent on medical expenses.

At Western Health Advantage, 92 cents of every $1 in insurance premiums pay for hospitals, doctors, labs, prescription drugs and other health care costs.

Spending on health care continues to outpace inflation and growth in our nation’s economy, consuming $1 out of $6 generated in the U.S. economy. AB 52 won’t stop the growing costs associated with higher rates of obesity, diabetes and other chronic illnesses. Nor will it address the fast-growing cost of new technology, which often improves care but is responsible for about half of the growth in medical spending.

The bill’s arbitrary price controls will apply only to health care premiums — not to the underlying cost drivers.

While failing to address the root cause of rising premiums, AB 52 actually will further shred the state’s safety net. California ranks dead last in the nation in payments per Medicaid enrollee. When Medicare and Medi-Cal fail to pay the actual cost of caring for their beneficiaries, providers must shift these unreimbursed costs to insurers.

This “cost-shifting” is not new — it has existed for decades — but the magnitude is increasing as cuts in governmental payments are continually made in the wake of state and federal budget deficits. This hidden tax and caring for the uninsured cost every insured California family $1,792 more per year.

California hospitals and physicians have to rely on private insurance payments to offset the billions of dollars they lose treating the uninsured and lower-income patients who have government insurance.

If regulators set rates at a level that doesn’t meet the cost of providing care, insurers will be forced to lower reimbursements to physicians, hospitals and other providers. It will lead to longer delays in getting emergency care, more emergency rooms closures and even fewer doctors willing to accept Medi-Cal or Medicare.

Most insured Californians get coverage through their employers and have seen increases of about 9.7 percent per year. A small percentage of insured Californians — about 7 percent — get their coverage through the individual market, where increases have been greater. But the state is moving forward to change this market so that prices will be lower and more people can get coverage.

As a result of the new federal health care law, the state is establishing the California Health Benefit Exchange, which will create an online marketplace for medical insurance for individuals and small business. Consumers will be able to compare the prices of similar plans and choose the one that fits their needs and pocketbooks.

By offering coverage to a wider group of people, this exchange is expected to greatly expand coverage and affordability.

The new federal health care law also requires 80 to 85 cents out of every $1 in premiums to be spent on medical care. Insurers must pay rebates to policyholders if they violate that law. In addition, California has adopted its own law that requires unprecedented accountability for health plans.

We should give these new laws time to work before agreeing to spend up to $30 million more per year for the Department of Managed Health Care and the Department of Insurance to erect vast new bureaucracies to implement AB 52 — especially now that California is slashing funding to schools and other vital programs.

I oppose AB 52 and join a growing opposition — including the California Medical Association, California Hospital Association, California Chamber of Commerce and more than 50 organizations — that understands the harm this measure will cause to patients.

— Garry Maisel is the president and CEO of Western Health Advantage, a not-for-profit health insurance company serving Yolo, Sacramento, Solano, western El Dorado and western Placer counties

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