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ACA and Healthcare Reform

State Net Capitol Journal: California Ponders Health Insurance Rate Regulation

By Rich Ehisen |

Note: On Nov. 4, 46 states will hold legislative elections, while 36 will elect or retain a governor. Meanwhile, 41 states will also weigh in on a wide range of ballot measures addressing some of the most controversial issues of the year, including abortion, marijuana use and the minimum wage. Over the next several weeks the SNCJ staff will preview some of what voters face on Election Day, with specific looks at a few of the more contentious ballot measures and races from around the country.
When President Barack Obama signed the Affordable Care Act into law in 2010, California embraced it with unbridled enthusiasm and began quickly passing legislation to implement it. This included creating the nation's first state-run health benefits exchange: an online marketplace where consumers could quickly and easily shop for health plans that best fit their needs and their pocketbooks, assured that the exchange — Covered California — had already done the hard work of thoroughly vetting plans for both quality and price. 
But four years later, the debate over how to best accomplish those dual goals is still raging, now in the form of Proposition 45, a ballot measure that would require most health insurance rate hikes to be approved not by Covered California or even lawmakers, but by the office of the state Insurance Commissioner. 
The brainchild of a group called Consumer Watchdog — a consumer rights advocacy group that has previously been the driving force behind similar regulation of automotive and homeowners insurance rates in the Golden State — the measure would grant the Commissioner final say over individual and small group rates, though not over those paid by large employers. To date, it has received strong support from current California Insurance Commissioner Dave Jones (D) as well as consumer groups, some unions, the state Democratic Party and both of the state's U.S. Senators, Democrats Dianne Feinstein and Barbara Boxer. 
Jones, the measure's most vocal supporter, argues it would put California on par with 35 other states that already allow their insurance commissioner to reject excessive health rate hikes. He says it would also plug a critical hole in the ACA's structure that allows state health officials to review proposed rate hikes but grants them no power to reject those they deem to be out of line. Jones contends that has kept him from blocking hikes he says have climbed by as much as 185 percent on some families in recent years. 
"We have rate review authority and both my office and the Department of Managed Health Care use it, but the insurers just go ahead and charge those rates anyway," he says. "And there's nothing in the ACA or our state laws that let me do anything to stop it." 
But the measure has also met fierce opposition from a plethora of opponents, including the state GOP, health insurers, numerous medical provider groups — including the California Medical Association and the California Hospitals Association — and the California Chamber of Commerce. 
Several members of Covered California's governing board have also made clear their opposition, arguing it would undermine their ability to negotiate plan options and rates with the insurers who sell policies through the exchange. Imagine, they argue, months of negotiations to reach agreement with an insurer on a suite of plans and prices, only to have it all fall apart if Jones or an ensuing commissioner rejects it all after the fact. And as worded, they say, Prop 45 could conceivably allow Jones final say over not just rates, but things like provider networks as well. 
Susan Kennedy, a Democrat who once served as chief of staff to Gov. Arnold Schwarzenegger (R), has been the most vocal, arguing during a recent board meeting that Prop. 45 would "end up hurting Californians, hurting consumers, increasing costs, and it will damage healthcare reform, perhaps permanently, perhaps fatally, in California and I think perhaps nationally." 
Others on the board, including Chairwoman Diana Dooley, the state's current Secretary of Health and Human Services, have expressed their own, though somewhat less fatalistic, complaints about the measure. Even so, on Sept. 18 the board voted against taking an official stance on the measure, opting to stay out of the political scrum. 
Opponents have other serious concerns as well. Some contend it would grant far too much power to one person; while others point to a facet of the proposition that would allow third party "intervenors" to get involved in rate cases that are under review by the Department of Insurance, a lucrative proposition that allows them to charge the state as much as $675 per hour. Consumer Watchdog has in fact been a regular intervenor on other insurance issues for more than two decades, and has collected more than $14 million in fees from the state since 1990. 
Micah Weinberg, a consultant with the Bay Area Council, a business group that opposes Prop 45, also refutes the claim that the measure would only bring California on par with the 35 other states that allow the insurance commissioner to reject health insurance rate hikes. 
"In reality, this is a case where 35 equals 0," he says. "No other state has what Prop 45 would set up. None." 
Weinberg says none of the states has a provision like the one in Prop 45 that would allow private entities like Consumer Watchdog to sue the commissioner if they disagree with his or her rulings on rates. In other states, the commissioner is also the final say on rate hikes; under Prop 45 it is unclear whether the California Department of Managed Health Care would continue to be involved in rate reviews. If so, that would mean yet another layer of bureaucracy involved in the process, which no other state has. Most other states also do not have "active purchasing" exchanges, i.e. their exchanges do not negotiate rates and product offerings the way California does. 
"Those are huge differences," he says. 
Those arguments appear to be gaining traction with potential voters. After a fast start that saw it polling at 69 percent approval, a California Field Poll released on Sept. 11 showed support dropping to just 41 percent. 
The road is likely to be even tougher going forward. Opponents, led by a group called Californians Against Higher Health Care Costs — in reality a coalition of health insurers like Kaiser Permanente, Anthem Blue Cross, Blue Shield and others — has collected almost $38 million to fight the measure, roughly eight times what its supporters have gathered. 

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