Health Insurance

Should California Regulate Health Insurance Premiums?

Published in: California HealthCare Foundation, Issue Brief, Mar. 2004, p. 1-11

Posted on on January 01, 2004

by Neeraj Sood, Abby Alpert, Dana P. Goldman, Mary E. Vaiana

Read More

Access further information on this document at

This article was published outside of RAND. The full text of the article can be found at the link above.

In response to several years of double-digit health insurance premium inflation, California Senate Bill 26 (SB 26) was introduced in 2003 to curtail insurance premium growth. Although SB 26 did not pass out of committee in 2003, proponents of premium regulation are likely to continue to pursue the idea, perhaps through new legislation or a future ballot initiative. This issue brief evaluates why health insurance premiums are rising and examines the potential long-term consequences of regulating premium costs, using examples from other insurance products such as automobile coverage and workers compensation. The findings underscore that if health care costs continue to rise while premiums are frozen, stringent rate regulation could lead to undesired consequences. These include: In the short term, insurers could balance their losses by reducing the quality or quantity of care, or both. Insurers could discourage unhealthy consumers from enrolling in plans, thus increasing the number of uninsured over time. If costs continue to rise and premiums are fixed, insurers may exit the market entirely. Over the longer term, regulation could discourage expensive treatments and technologies, no matter how beneficial, from coming to market. (A desirable related consequence is that premium regulation could motivate the introduction of cost-saving technologies.)

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.