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California Lawmakers Discuss How Geography Will Help Shape Health Premiums

Feb 21, 2013

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California lawmakers are deciding how geography can affect health insurance premiums in the individual marketplace.

Lawmakers got one step closer to ironing out new rules that would guarantee insurance to individuals regardless of their prior health history. But, they still need to decide how companies will factor in where someone lives into premium rates.

Right now the bills in a special session of the California legislature would allow insurers to rate premiums using six geographic regions. But Insurance Commissioner Dave Jones proposes three times that number, which he says will minimize rate increases.

“If you take people that live in lower medical cost areas and throw them into a rating region where there are people – where there are higher medical costs, then the people with the lower medical costs are going to get hit with a higher rate,” says Jones.

Health insurers also want more rating regions. But some consumer advocates disagree.  Anthony Wright of Health Access says he’d like to see a smaller number of bigger geographic regions. He says preventing ‘game-playing’ by insurers is only one reason.  

“To provide greater simplicity and transparency in our market, and to have bigger pools so you can socialize the risk and cost of care among a greater number of people,” says Wright.

The bills passed their first legislative committee tests this week. Increasing the number of geographic rating regions would require federal approval.