It is a truth universally acknowledged that a patient in need of a physician must be in want of an insurance policy. In other words, my apologies to Jane Austen aside, if you need to see a doctor, you had better have health insurance. With premiums and all those other niggling costs, such as out-of-pocket fees, out-of-network fees, deductibles, co-pays and percentages of total cost, all predictably rising, many Californians have been forced to forgo insurance. They do this at their own peril since we are all just one illness, one accident away from physical and financial devastation. Insurance is the only way most people can possibly afford to pay their medical bills, even for relatively minor issues. Medical costs are so high that even the insured often face insurmountable bills for a major event, and unpaid medical bills are the most common reason for people to go into bankruptcy.


What it is like to be self-employed and uninsured


Chris Jensen is 55 years old and freelances as a photographer and graphic designer. The Ventura resident has been buying his own health insurance for a long time. But now, he is uninsured.

“I have a pre-existing condition, glaucoma,” he said. “I was with Blue Cross until their rates kept going up. So I was with AARP for about two years when they decided to drop my ophthalmologist from my network. They decided to drop the only doctor that I was using.”

Jensen said he had always kept an insurance policy in case something catastrophic happened. “If I’m going to pay for a policy, I want it to cover at least what I need,” he said. “It is really hard to slap down $500 to start a policy that basically doesn’t cover much.”

Jensen has successfully tried Chinese herbal medicine and natural remedies and said he believes that if he were to be diagnosed with a very serious illness like cancer, he would look for alternative therapies before going the traditional medical route. He is also concerned about the cost of insurance as he struggles to maintain a profitable business. He believes the entire system is failing right now.

“I think it’s all just dreadful,” Jensen said. “I think it’s America at its worst. I think that the pharmaceutical companies and the insurance companies are robbing us blind. I don’t think insurance should be for profit, I’m all for socialized medicine. All these people who are against Obamacare, probably most of them are just against Obama.”

The numbers tell a scary story

There are two groups of Californians who pay for their health insurance, those who get insurance through their employers and those who pay for individual policies.

Californians who pay for health insurance, one way or another, know that the premiums continue to rise at a rapid pace. A recent survey by California Healthcare Foundation found that health insurance premiums have increased by 153 percent in the past decade. That is more than five times the 29 percent rise in the rate of inflation during the same period.

Employers who subsidize health insurance for their workers have been slapped with huge premium increases. So much that the same study also reported the percentage of companies purchasing health insurance has dropped by 10 percent in the past two years. More than a third of the employers said they would be passing the increased costs along to their employees.

As the premiums continue to increase, consumers may be curious as to where their money is going. Some of it has gone straight into the pockets of the CEOs of major insurance companies. For instance, the CEO of Blue Shield was paid $4.6 million in 2010. At Kaiser Permanente, the CEO earned a combined $7.7 million in benefits and compensation.

Carmen Balber of Consumer Watchdog said that some of the nonprofit insurance companies are holding massive amounts of cash in reserve.

“Kaiser has reserves that are 1,200 percent of the state minimum,” she said. “Blue Shield’s reserves are 1,400 percent the state minimum.”

The premium increases continue to come. Blue Cross has proposed raising its premiums another 9.6 percent up to nearly 20 percent, affecting about 700,000 individual policy holders. That is down from the initial plan to increase some premiums by nearly 30 percent. Those rate hikes would only increase the burden on Californians who now carry debt. According to a recent UCLA study, about 2.6 million residents age 64 or younger now shoulder some medical debt. In 2007, that number was 400,000 fewer residents.

When asked by the Sacramento Bee why insurance premiums and health care costs continue to increase, a spokesman for the California Association of Health Plans replied that current health care costs in California are now at $280 billion. The group projected the cost could soar to $552 billion by 2020. Based on these future projections, the group has justified rate hikes. The group also blames the lifestyles of their customers for obesity, smoking and a sedentary lifestyle, which have contributed to increases in chronic illness. Also cited were rising prescription prices and hospital seismic retrofitting, some 18 years after the Northridge quake.

And then there is the large number of people who have dropped all coverage. The industry claims that many young, healthy people have stopped buying health insurance, leaving the insurance companies with the costlier, sicker and older customers. As premiums rose, fewer Californians could afford the coverage, which raises the question: how did this vicious cycle begin?


Failure to regulate in California

There are 35 states that have the authority to regulate health insurance. California is not among them. There have been six attempts to pass laws in California to create a limited universal single-payer option. All have failed.

How did insurance companies become so powerful with so little regulation? Historically, the story begins in 1735 with the adoption of fire insurance in South Carolina. Later Benjamin Franklin formed a mutual insurance company in 1752 for coverage against fire. Even then, any risk seemed to be more than the insurance company would accept, with Franklin’s company refusing to insure all houses made of wood.

It was in 1944 that federal regulation of the insurance industry was declared constitutional by the U.S. Supreme Court, finding that the Commerce Clause allowed such regulation. But that did not sit well with Congress and legislators immediately passed the McCarran-Ferguson Act in 1945. It says that although states can and should regulate insurance companies, the federal government is barred from passing a law that would invalidate or supersede any state law regulating insurance.

Even when the Federal Trade Commission tried to intervene in 1979 and the early 1980s, when so many insurance companies were going bankrupt, the Senate Commerce Committee voted unanimously to stop the FTC in its tracks.

The Patient Protection and Affordable Care Act of 2010, the major health care reforms passed under the Obama administration, will not be fully implemented until 2014. Arguments for and against the reforms were heard by the U.S. Supreme Court in March and a ruling is expected by June.

The state Department of Insurance and the state Department of Managed Health Care (DMHC) both have the ability to scrutinize health insurance rates and raises, and can comment publicly on whether those raises are considered to be justified. They can also try to persuade, or even embarrass, insurance companies into rolling back proposed rate hikes. But they have no power to force the industry to obey. In fact, out of 300 cases, rate increases in only 17 percent were reduced or dropped.

One particularly devastating ploy by some insurance companies, the practice of rescission, has been controlled by the state. Under the Knox-Keene Act, the DMHC has the authority to levy fines and overturn insurance company decisions not to pay claims. Using this, it has clamped down on the odious practice of cutting off all medical payments for a major illness or injury, either on a technicality or for a nonexistent reason that the insurance company placed in the file. This practice sometimes occurred even after some of the bills had been paid, leaving sick patients, who thought they were fully insured, without coverage and burdened with tens of thousands of dollars in new medical bills. A state settlement with the five largest companies mostly ended that practice.



A new initiative

Consumer Watchdog, a consumer advocacy group, is gathering petition signatures for a new proposition to appear on the November ballot. It needs to collect 505,000 verified signatures by the deadline of May 1. This initiative would give the state insurance commissioner the authority to deny premium or other rate increases as well as require fiscal transparency by the insurance companies.

Consumer advocate Balber said there is an urgent need for this law. “We saw last year that Anthem proposed a rate hike. The Department of Managed Care found that it was unreasonable, and Anthem went ahead with the hike anyway.”

The initiative is supported by U.S. Sen. Dianne Feinstein, D-San Francisco, who was the first person to sign the petition. In a letter to constituents, Feinstein said, “The five largest health insurance companies made a combined profit of $11.7 billion in 2010. That was a 17 percent increase over the 2009 profit of $9.9 billion and a 51 percent increase over the $7.8 billion made in 2008.

“Consumer Watchdog’s ballot measure,” Feinstein wrote, “would require health insurance companies to publicly justify their rates before rate hikes take effect.”

The state’s third-largest health insurance company, Aetna, raised rates between 8 percent and 21 percent on April 1, affecting 77,000 workers. State Insurance Commissioner Dave Jones publicly declared that those increases were excessive and reiterated his support for the initiative.

There is plenty of opposition, however, in a press release, a new coalition of the insurance industry and medical community, called Californians Against Higher Health Care Costs, claims that the initiative will “add layers of regulation to health care, create a costly new bureaucracy, and give ONE politician nearly total control over health care coverage and prices, ultimately leading to higher rates and less access to care for consumers.”

Balber said the health care industry has been throwing a lot of money around in Sacramento through its lobbyists.

“Last year, they spent $35 million to pay lobbyists,” she said. “Kaiser, the state’s largest HMO, was at the top of that pack, having spent $3.5 million last year, and that money pays off. They have been able to successfully block any regulation of the prices that they charge customers.”

Balber said this new initiative would cover 5.3 million Californians. “They (insurance companies) focus on California for one very good reason: California has the largest insurance market in the country.”

The release also called Consumer Watchdog “a trial lawyer-funded special interest group,” which is trying to “open up health insurance to the same scheme that has allowed Consumer Watchdog and trial lawyers to make millions of dollars off of auto and homeowners insurance.”

A war of words has erupted between Consumer Watchdog and the president-elect of the California Medical Association, Dr. Paul Phinney. In an exchange of letters, Consumer Watchdog accused Phinney of not representing doctors but instead representing the interests of his former employer, Kaiser Permanente, where he worked for the past 34 years.

In Phinney’s response, he elaborated on the reasons why he is against the initiative. “Your measure is nothing more than a poorly disguised attempt to siphon health care dollars away from patient care into the hands of consumer attorneys, leaving even less money available to provide care while doing absolutely nothing to address the underlying drivers of health care costs.”

The letter continued. “Do you honestly believe that arbitrarily imposing regulation on insurance rates will solve the problems our health care system is inundated with today? Your flawed initiative does nothing but take advantage of consumer angst in order to redirect dollars away from needed health care into intervener fees.”

And this: “I find your efforts with this initiative to be opportunistic, misleading and mean-spirited. … In a word, nefarious.”

Even as the U.S. Supreme Court considers the constitutionality of the Affordable Care Act, Gov. Jerry Brown and state Insurance Commissioner Dave Jones want to have a similar system in California, in case the federal health reforms do not stand.

In 2010, California was the first state in the nation to take steps to implement the Affordable Care Act. As for the controversial mandate requiring everyone to purchase health insurance, Jones told the Los Angeles Times, “We require everyone to have auto insurance in California, and the world hasn’t stopped spinning on its axis. All this political tumult generated by the right is really ignoring the reality in California and elsewhere.”



Health care districts

Back in the late 1940s, rural areas in California lacked adequate medical services. So a law was passed requiring the formation of county special districts to build and operate hospitals and health care centers. But the mission of the districts is vague. It is simply to provide health care facilities for the benefit of the people in that district. That means different things to different counties.

Ventura County has different needs than many other counties. Ventura County ranks 17th in health outcomes out of 56 counties. That is a very good showing. Ventura County ranks ninth in mortality statistics, gathered by the state. It has a violent crime rate nearly half that of the state average. Also, social and economic factors put Ventura County at number eight. As such, the health care district has taken on a unique mission.

The Camarillo Health District covers the entire county. It focuses on wellness, prevention and education, and provides a variety of classes and services for residents.

Kara Ralston is the chief operating officer of the Camarillo Health District and said that 35,000 to 42,000 citizens currently participate in one of the programs.

“People are seeking to educate themselves more, take more control of their health decisions, making life changes, feeling more empowered to make those changes. That’s what we’re seeing,” Ralston said.

CEO Jane Rozanski said that Ventura County is breaking new ground. “Camarillo is what a typical community will look like in 15 to 20 years. That’s why we are the pioneers. Camarillo is 22 percent seniors; most communities are 12 percent to 14 percent seniors. There is no model for us to follow because nobody else has the statistics that we have, so we’re forging ahead.”

Whatever changes are in store for the Affordable Care Act or for California, you still need to provide health care for yourself and your family right now. Staying informed on the changing rules of health insurance will only help you make better decisions in the future.