Proposal Would Provide Consumers with Resources to Hold the Industry, Regulatory Agencies Accountable

Legislation to create a new consumer-oriented watchdog organization that advocates on behalf of insurance policyholders and patients before regulatory agencies, the legislature and courts was announced today by the Foundation for Taxpayer and Consumer Rights (FTCR), the bill’s sponsor.

SB 1738 introduced by Senator Tom Hayden establishes the Insurance Policyholder and Patient Association, a non-profit, public benefit corporation based on the Nader-conceived Citizen Utility Board (“CUB”) model. The legislation grants the organization access to DMV mailings as a way to inform consumers about its mission and pool resources to hire advocates and experts to counter the industry for $10 per year.

“The spending by the insurance and HMO lobbies in California to defeat important consumer protections and to advocate for higher rates is legendary,” states Harvey Rosenfield, FTCR President and author of 1988 insurance reform measure Proposition 103, “while at the same time, the consumer protection records of the agencies charged with overseeing these industries are dismal. Recent events within the Department of Insurance especially highlight the need for an independent consumer watchdog.”

“The purpose of this legislation is to create an association of, for and by consumers that can participate in ratemaking and policysetting proceedings on a level comparable to professional health care and insurance associations,” states bill author, Senator Tom Hayden

Following the highly-effective advocacy methods used by established Citizen Utility Boards (CUBs), the Insurance Policyholder and Patient Association will, under the direction of a democratically-elected board and through membership donations rather than tax dollars, perform the following services:

‘ conduct research and provide information to the public concerning the quality and cost of insurance and health care services provided by insurers and health care businesses;

‘ advise and watchdog state agencies in their promulgation of any standards and regulations related to insurance or health care;

‘ advocate legislation or other proposals to protect and promote the interests of insurance policyholders and patients; and

‘ represent and promote the interests of insurance policyholders and patients before administrative and judicial bodies by initiating, intervening or participating in proceedings related to health care or insurance.

“The complexity of insurance and health care issues necessitate that consumers have their own independent experts to counter the extensive resources the industry brings to bear on key policy decisions,” states Pamela Pressley, FTCR consumer attorney and bill drafter. “The ability of the Insurance Policyholder and Patient Association to reach the largest number of Californians through DMV, insurer and HMO mailings is the key to consumer participation and empowerment.”

CUBs in Wisconsin, Illinois, Oregon, and San Diego, California have successfully saved utility ratepayers billions of dollars in rate hikes over the last fifteen years. Some key advantages of the CUB model include:

‘ Means to Empower Consumers: Individual consumers and even private consumer organizations cannot match the resources of the industry who are able to hire full-time accountants, lawyers, auditors and other experts to advocate their interests. By pooling their resources through a CUB-like organization, consumers can have their own full-time advocates.

‘ Ability to pool consumer resources efficiently: Through state-authorized access to state agency and industry mailings, consumer-based associations can raise funds quickly and cheaply.

‘ Independence from political pressures and budget constraints: Unlike governmental regulatory agencies, CUBs are not subject to pressure from campaign donors nor are they constrained by limitations imposed on their annual budgets to advocate for consumers’ interests.

‘ Democratically-elected boards accountable solely to membership: Members in geographically-defined districts can elect directors to a board that will hire experts and set the policies of the association regarding consumer representation before administrative, judicial and legislative bodies.

The idea for an insurance CUB-like organization was originally proposed as part of Proposition 103, but never went into effect because it was held to violate the California Constitution which disallows any law requiring private corporations to perform any function or have any power or duty when established by initiative, referendum or as an amendment to the Constitution. There is no such bar, however, restricting the Legislature’s ability to pass legislation establishing the Insurance Policyholder and Patient Association.

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