California’s Proposition 45 Would Offer Public a Say on Health Insurance Rates

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Yes on Proposition 45 supporters rallied this month outside Blue Shield of California in El Segundo. The ballot measure would require health insurance companies to justify rate increases. Photo Credit Monica Almeida/The New York Times

LOS ANGELES — A year after the federal Affordable Care Act took effect, California voters are now considering another major change to health care: a ballot measure that would give state officials the authority to veto health insurance rate increases for individual and small group plans.

Proposition 45 would hand broad new control of the individual health insurance market to the state insurance commissioner, who could reject rate increases deemed excessive. The measure is designed to keep costs down for consumers in a state where health care premiums have spiked in recent years, raising public ire.

But that was before the Affordable Care Act. Now, Covered California, the state’s health care exchange, negotiates rates with insurers. And opponents of the ballot measure warned that it could undermine the early successes of Covered California, which enrolled more than 1.1 million people — more than any other state — in its first year.

With millions at stake for consumers and insurance companies, the campaign has become one of the most expensive in the state. Insurers in California — primarily Kaiser Permanente, WellPoint and Blue Shield of California — have poured more than $55 million into defeating the measure, more than 15 times what the supporters have raised.

Dave Jones, the insurance commissioner, who is running for re-election, said the huge sums that insurance companies had spent trying to discredit the measure and its supporters demonstrated the need for laws to stop them from raising rates at will.

“Even with the successful implementation of the Affordable Care Act, Californians are still facing double-digit rate hikes,” Mr. Jones, a Democrat, said. “Right now, health insurance rates are set behind closed doors. The public has absolutely no say. This proposition is about allowing the public to participate.”

Most states require approval by state regulators for at least some health care rate increases, according to a study by the Kaiser Family Foundation.

But Proposition 45 would go further than other states: Even after the commissioner approved a rate increase, members of the public could sue to stop it.

The insurance companies, all three of which have refused to speak publicly about the measure, are hardly the only opponents. Health care reform advocates, including the Democrats who dominate state politics here, remain split. Even some longtime supporters of more robust health insurance regulation have balked, saying that additional regulations could confuse consumers or drive insurers from the marketplace.

Unlike with auto or property insurance, most consumers can sign up for new health coverage only during the annual open-enrollment period that begins in November.

George Miller, a Democratic congressman and a co-author of the Affordable Care Act, said he worried the proposed rate approval system could slow the process for determining the annual rate, leaving consumers in the dark during open enrollment. He suggested waiting to see whether Covered California’s negotiations with insurers kept rates down.

“To put this considerable amount of turmoil in the open enrollment process worries me,” Mr. Miller said in a telephone interview.

Mr. Miller visited call centers after last year’s start-up and listened to some of the conversations with potential Covered California customers. “It didn’t take much confusion before people would say, ‘I’ll call you back,’ ” he said. “My goal is to enroll every single possible person this time.”

Diana S. Dooley, a member of Covered California’s board, said the exchange had been aggressively negotiating to keep premiums reasonable, which she worried might become more difficult if the commissioner could then reject rates. But she said the provision that would allow consumer groups and other interveners to sue over rates even after the commissioner had approved them was the most concerning part of the ballot measure.

“Someone who’s a foe of the Affordable Care Act — and goodness knows we’ve seen a few of them over the last year — could go to court as a way to destabilize the program and delay approval of rates until after the open enrollment period,” Ms. Dooley said.

The measure’s sponsor, a group called Consumer Watchdog, backed a similar and successful ballot proposal in 1988, which brought rate approval to auto, home and business insurance. After California adopted it, rate approval soon spread across the country in those industries, and the policy has helped keep rates down, said Jamie Court, the president of Consumer Watchdog. He said Proposition 45 had the potential to do the same.

“If really tough regulation passes in California, it will spread to other states, and we will start to see tougher oversight more generally,” Mr. Court said.

Adam Nagourney contributed reporting.

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