Calif. Ballot Initiative Seeks Health Insurance Price Controls

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A ballot initiative before California voters in November could challenge insurance coverage set up under Obamacare, imposing the same kind of price controls on health insurance that already exist on the state's auto, property, and casualty insurance.

The "Insurance Rate Public Justification and Accountability Act," up for a vote Nov. 4, is being promoted by the group Consumer Watchdog and is supported by the state's insurance commissioner, who would have broad authority to question rate increases for insurance provided in the state's Covered California healthcare exchange.

Consumer Watchdog, which was successful in stopping increases in other types of insurance coverage rates, said it helped to save consumers about $2.9 billion as it intervened in 71 non-health insurance cases going back to 2002, the Sacramento Bee reported.

"We have saved huge amounts of money for [consumers] because insurers know better than to raise rates," the group's president, Jamie Court, told the newspaper.

But opponents of the ballot measure include several health plans, hospitals, and some physicians. They say that allowing the state to scrutinize the rates would add waits to approval times, diminish reforms already created under the new health law, and open the door for legal challenges that could disrupt coverage.

Earlier this month, an alliance of opponents called Californians Against Higher Healthcare Costs released a study they commissioned by a consultant who worked on Massachusetts' healthcare law, a model for the Affordable Care Act.

The report from Jon Kingsdale of the Wakely Consulting Group said California's healthcare exchanges should be allowed time to work and not be shaken up by intervention from outsiders, as a ballot measure might do.

"In summary, the initiative would disrupt the most comprehensive health reform undertaken since the enactment of Medicare and Medicaid almost a half-century ago. It would be especially disruptive to introduce long delays, and to generate jurisdictional competition just as the new marketplace is finding its feet," he wrote.

"To do so might freeze consumers into existing plans, disrupt calculations of federal tax subsidies for low- and moderate-income enrollees, allow opponents of the ACA to grind it to a halt, and create considerable uncertainty for consumers, health plans, and care providers alike."

The report noted that "the impact of regulatory and judicial delays in approving premiums and of the ACA's opponents posing as interveners to obstruct Covered California would directly harm consumers."

If the ballot initiative were to pass, the study suggests, it might eventually close down state exchanges altogether. "In the nightmare scenario, it could even help extremists use court delays to shut down California's new individual market."

Some critics of Obamacare are not in favor of the ballot initiative, saying it would distort the free market and is unlikely to result in lower premiums.

"If you say, 'We'll fix the prices for the plans,' that will inevitably drive prices higher, which is not the sort of thing I would consider pro-consumer," said Lanhee Chen, a former domestic policy director for the Mitt Romney presidential campaign and a research fellow at Stanford University's Hoover Institution who studies healthcare policy.

"I have no confidence that Obamacare will keep premiums down in 2015," Chen told Newsmax, calling the law "flawed" policy.

"I think here in California it's seen as being pretty popular. California skews left as a state, so it's not surprising. I think the question will be, will the law continue to be popular as people's premiums go up and their access to doctors goes down."

California has enrolled the largest percentage of consumers into the state's healthcare exchanges.

"It's fair to say in California people do perceive the exchange positively. I think we do have to be careful because there may be a perception out there that if a popular group calls itself a consumer watchdog group, we assume they must be for consumers," Chen said.

"But I think people need to take a good, hard look at what they are trying to do" and "at how can we have a competitive marketplace and bring down premiums.

"Obamacare makes it hard to do that. I would worry if you have someone saying everyone must charge the same rate. All that will do is drive premiums up, and that's at the heart of Obamacare. But if you have competition, you will drive prices down."

Edmund F. Haislmaier, senior research fellow in health policy studies at the Heritage Foundation in Washington, D.C., sees the initiative as foolish.

"Contrary to what the left likes to think, this is not an issue of insurance overpricing because in a competitive market, if your competition charges more, you can adjust," he told Newsmax.

"The danger with insurance and the reason for rate regulation is to make sure that they charge enough and don't wind up getting themselves into trouble because the temptation is to charge lower rates and then you get more business, but if you get a lot of claims and have no money to pay for it," the companies would have to be bailed out.

Haislmaier noted that the whole point of rate review is to evaluate whether the insurer is charging sufficient premiums to cover actual risk.

"It is in nobody's interest for the insurer to be unable to pay claims and essentially default," he said.

The federal Department of Health and Human Services added a rate review provision within the Obamacare law, he added, but has no ability to enforce it.

"They can name and shame you, but they can't compel them to reduce the rate the same way a state insurance department can. So, I think some responsible insurers may say, I'm out of that market," he said. "The whole thing is a bad idea. It's based on a misunderstanding of insurance rates and insurance competition."

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