Proposition 45, which would give rate-regulation authority over health insurance to the state’s elected insurance commissioner, would mostly affect roughly 6 million Californians who buy their own insurance or get it through their employment with a small business (50 or fewer employees).
The issue has surfaced several times in the state Legislature, where then-Democratic Assemblyman Dave Jones of Sacramento, now the insurance commissioner, unsuccessfully pushed for bills that would give the office that power. Santa Monica-based Consumer Watchdog, the same nonprofit behind a 1988 measure that regulated auto and homeowners’ insurance, picked up the fight for health insurance.
Under Proposition 45, the state Department of Managed Health Care would still regulate certain policies and could review certain rates. But the commissioner would be the only one who could approve the rates insurers could charge.
The biggest unknown is how voters will react to the measure now that the state has adopted a new health insurance exchange board that is charged with carrying out the federal Affordable Care Act. The exchange has the ability to negotiate with insurers over exchange policy rates and benefits.
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What it does
▪ Requires individual and small group health insurance rates – including premiums, co-payments, deductibles and other benefits – be approved by the state insurance commissioner under a similar process established for auto insurance under Proposition 103.
▪ Allows the commissioner to review and approve health rates retroactively to Nov. 6, 2012. The commissioner could order refunds to ratepayers.
What it costs
▪ According to the Legislative Analyst’s Office, the measure would lead to increased costs for the Department of Insurance in the “low millions of dollars” range to complete the rate review work. The analyst also predicts that the measure could result in higher costs for Covered California, the state’s health insurance exchange, because the new process could delay approval for some plans offered by the exchange.
Who’s for it?
▪ Consumer Watchdog
▪ California Nurses Association
▪ Consumer Attorneys of California
▪ U.S. Sens. Dianne Feinstein and Barbara Boxer, D-Calif.
▪ Insurance Commissioner Dave Jones
▪ California Democratic Party
▪ California Federation of Teachers
▪ California National Organization for Women
Who’s against it?
▪ California Medical Association
▪ California Association of Health Plans
▪ California Chamber of Commerce
▪ California Hospital Association
▪ State Building and Construction Trades Council of California
▪ California Citizens Against Lawsuit Abuse
▪ California Republican Party
▪ California Taxpayers Association
Supporters had raised $2.7 million through Oct. 18, though about $700,000 was in an account supporting both propositions 45 and 46.
▪ California Nurses Association: $1 million
▪ Consumer Watchdog: $485,000
▪ Insurance Commissioner Dave Jones’ initiative committee: $140,000
Opponents had raised $55.3 million in loans and contributions through Oct. 18, including:
▪ Wellpoint Inc.: $18.5 million
▪ Kaiser Foundation Health Plans: $18.7 million
▪ Blue Shield of California: $12.4 million
▪ Health Net Inc.: $5.4 million
How true are competing claims?
▪ The measure provides transparency to the process by requiring companies to disclose rationales for rate increases.
It’s true that the measure would provide for public notice, disclosure and hearings on rate changes, as well as a later judicial review. It also would require a sworn statement by insurers about the accuracy of information submitted to the commissioner to justify rate changes.
▪ A similar process for auto and homeowners’ insurance has been in place since 1988 and saved consumers more than $100 billion.
Proposition 103, approved by voters in 1988, does apply similar scrutiny to car and homeowners insurance. A study by the Consumer Federation of America, the parent nonprofit of a supporter of the measure, based the savings figure on a finding that consumers in California are actually spending slightly less on auto insurance than they were in 1988, while expenditures in other states have continued to rise. Insurance Commissioner Dave Jones has said that policyholders have saved more than $1.4 billion in premiums in four years as he prevented excessive rates charged to car, homeowner and other property and casualty insurance holders. No independent study has been done.
▪ Giving rate approval authority to the insurance commissioner would disrupt the work of Covered California, the state health insurance exchange.
Insurance regulators already have this power in 35 states and the District of Columbia. Both the exchange and the new rate-regulation system would coexist if voters approve Proposition 45. Covered California’s board has the power to negotiate with the health insurers over rates and benefits, but because the talks are private it’s unclear after two years to what degree members have exerted that privilege. The initiative would allow the state insurance commissioner to reject rates negotiated by the board – just as a similar, voter-approved process already allows for car and homeowner insurance rates.
▪ Proposition 45 would turn over rate-setting authority to an elected politician who would act on behalf of contributors, rather than consumers.
California’s insurance commissioner does run for election and solicit money from donors. But the argument also ignores the fact that most of the money being spent to defeat the measure comes from the health insurance industry – a special interest with perhaps more skin in the game than anyone else.