Commentary: The vicious cycle of insurance rate hikes

In the face of jawboning by Insurance Commissioner Steve Poizner and other politicians, Anthem Blue Cross, California's largest for-profit health insurer, announced Saturday that it will postpone its planned 39 percent rate hike.

That's welcome news.

Rate hikes of this magnitude would surely prompt thousands of Anthem's 700,000-plus customers in California to drop their individual coverage, putting more strains on emergency rooms. Hospitals would then pass costs onto insurance companies, which would respond with ever-higher rate hikes.

It's a vicious downward cycle.

Part of the answer, of course, is national health care reform, which (if Congress gets it right) would help cover all Americans and require all to obtain insurance. That would reduce costs that hospitals must either absorb or pass along, eliminating one of the cost-drivers to the current system.

Yet given the chance that Congress won't act on real reform in the near future, California must have a strategy to deal with insurance companies that seek rate hikes above the inflation rate for medical costs. One clear option is to regulate the rates that health insurance companies charge.

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