State Farm approved for unprecedented rate hike

Three months after first making the request, California’s largest insurer received approval Tuesday to temporarily raise its rates following the deadly Los Angeles County wildfires in January, writes CalMatters’ Levi Sumagaysay.

Starting June 1, State Farm can hike up its rates by an average of 17% for homeowners, 15% for renters and condos and 38% for rental dwellings. The insurer said it needed emergency interim rate increases “to help avert a dire situation” for its customers and for California’s strained insurance market.

Besides getting the final sign-off from California Insurance Commissioner Ricardo Lara, State Farm also had to get approval from an administrative law judge, Karl-Fredric Seligman.

• Seligman, in his decision: “Taken as a whole, it represents a fundamentally fair, adequate, and necessary measure — effectively functioning as a rescue mission to stabilize State Farm’s financial condition while safeguarding policyholders.”

Seligman’s decision also addressed the possibility that this approval could lay the groundwork for other insurers to request emergency interim rate increases following major wildfires. 

The agreement between State Farm and the insurance department does come with a few strings: State Farm has agreed to secure further financial assistance with a $400 million loan from its parent company, and it promised to hold off on policy non-renewals through the end of the year.

Lawmakers and L.A.-area wildfire survivors are also pressuring the insurance department to investigate State Farm for its delayed handling of some claims, which they have argued is reason enough to reject or delay the rate request. But during an online meeting over the weekend with survivors, Lara said the request and the claims complaints were separate issues.

After the rate approval, some survivors criticized the move. 

• Joy Chen, leader of the Eaton Fire Survivors Network: “That’s exactly the problem. Approving this rate hike without reviewing State Farm’s conduct would send a chilling message to every Californian: You can pay your premiums — but don’t count on your insurer when disaster strikes.”

Read more here.

On Tuesday Gov. Gavin Newsom said he will seek tighter regulations for pharmacy benefit managers — intermediaries between prescription drug makers and insurance companies — with the aim of reducing drug prices, report CalMatters’ Alexei Koseff and Kristen Hwang.

As part of an updated state budget plan that the governor is expected to go over today, Newsom is calling for California’s Department of Managed Health Care to license pharmacy benefit managers and for those managers to report operational and financial details. Consumer advocates and health economists argue that these intermediaries drive up drug costs by adding fees and retaining discounts as profit.

In September Newsom vetoed a bill that would have regulated these middlemen in a similar way. At the time he wrote that he remained unconvinced that the bill’s licensing requirement would drive down drug prices. Newsom’s office did not explain why the governor has since changed his stance.

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In California more than 150,000 teenagers this year are getting a head start on their higher education by enrolling in dual enrollment courses — college-level classes high schoolers can complete to receive college credit. But one school in San Jose is one of California’s first middle schools to offer a college-level course, which has some educators concerned.

As CalMatters’ Adam Echelman explains, 13- and 14-year-old students at August Boeger Middle School can attend a college “Career Planning” course offered by the San Jose Evergreen Community College District, where they can learn about career paths, resume writing and more. 

Though there is little data on middle schoolers specifically, other research has shown that high schoolers who take college classes are more likely to attend and graduate college. But as the college district looks to offer other courses, such as sociology and ethnic studies, some are worried about the quality of classes and their complex subject matter.

Read more here.