|Budget Issue:||Actuary reviews of health insurance rate filings|
|Program:||Department of Insurance|
|Finding or Recommendation:||Provide $1.2 million to extend nine limited-term positions related to actuary reviews of health insurance rate filings for another two years, rather than make the positions permanent as proposed by the Governor. The number of actuary reviews may change after 2013-14 and it is possible that federal funds may be available to support some of the workload.|
Governor’s Proposal. The Governor's budget for 2013-14 provides $1.2 million from the Insurance Fund to the California Department of Insurance (CDI) to make nine limited-term positions permanent, in order to support the continued implementation of Chapter 661, Statutes of 2010 (SB 1163, Leno). Chapter 661 requires CDI to conduct actuary reviews of health insurance rate filings. Actuaries analyze rate adequacy to insure against overcharging. The department completed 340 reviews in 2011-12, and projects to complete 345 reviews in 2012-13 and 400 reviews in 2013-14.
Need for Permanent Positions and Funding Uncertain. Based on our review of the Governor's proposal, it is uncertain at this time what level of resources the department will need on an ongoing basis to conduct actuary reviews. This is because CDI is requesting nine permanent positions based on only one year of actual data on the number of filings. Moreover, it is unclear how the number of filings will change in the out-years as health care reform is implemented in the state. In addition, we note that the Department of Managed Health Care currently receives federal funding to support positions working on rate reviews. Thus, it is possible that similar federal funding may be available to support CDI's workload, rather than state special funds.
LAO Recommendation. In view of the above, we recommend that the Legislature extend the nine limited-term positions for another two years, rather than make them permanent as proposed by the Governor. We also recommend that the Legislature direct CDI to report at budget hearings on the availability of federal funding for the required workload.