Consumer Advocate Harvey Rosenfield Takes on Health Insurers

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Rosenfield, who used California's initiative process to regulate auto insurance rates more than two decades ago, is preparing a new initiative that would force health insurers to get state approval before they could raise premiums.

Sacramento, CA — The former "Nader's Raider" who used California's initiative process to regulate auto insurance rates is headed back to the ballot. This time he's spoiling to take on health insurers.

Harvey Rosenfield, the combative attorney and consumer advocate who wrote California's landmark Proposition 103 more than two decades ago, is preparing a ballot initiative that would force health insurers to get state government approval before they could raise premiums.

Stricter controls are needed to put some restraints on a industry that's reaping fat returns for shareholders and multimillion-dollar salaries for executives while consumers struggle to pay for coverage, Rosenfield said. In California, average premiums for family coverage rose 7.5% in 2010, according to the California HealthCare Foundation. They increased by 3% nationally for the same period. About 1 in 5 Californians, or 7.2 million, have no health insurance.

"Everybody knows the horror stories," said Rosenfield, founder of the advocacy group Consumer Watchdog. "Premiums are going through the roof. A lot of people can't get health insurance at any price. Benefits are going down. Company CEOs are getting rich."

Consumer Watchdog submitted a draft of its initiative to state authorities this month, a first step toward placing the measure on the November 2012 ballot. Getting it there won't be cheap. The Santa Monica group would need to gather signatures from at least 505,000 registered voters, a process that could cost around $3 million, according to election experts.

If approved by voters, the measure would give California the country's most stringent regulation of the 35 states that have some form of health insurance oversight.

Health insurers denounce the initiative as big-government meddling that could lead to higher rates and less coverage for everyone.

"Giving a politician the power to set prices does not address the real reason healthcare costs are increasing and could threaten patients' access to medical care," said Charles Bacchi, executive vice president of the California Assn. of Health Plans.

The industry could spend more than $100 million trying to defeat Consumer Watchdog's proposed initiative, said Michael Mattoch, a former insurance committee staffer in the state Legislature and current executive at auto insurer USAA.

But Rosenfield and Jamie Court, Consumer Watchdog's president, say they like their chances. Private focus groups and polling show 80% of voters queried would support reining in health insurers, they said.

Some independent analysts share their assessment.

"I imagine this would be quite popular going into a [national] election. Insurance companies are not exactly the most favorite institutions," said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a national healthcare think tank not related to the Kaiser Permanente health maintenance organization.

Rosenfield is no stranger to David versus Goliath battles.

Helped by his mentor, consumer activist Ralph Nader, Rosenfield in 1988 persuaded California voters to pass Proposition 103. That landmark ballot initiative slashed car insurance rates and forced auto insurers to get approval from state regulators for future premium hikes. The law also applies to rates for homeowners' and most other lines of property and casualty insurance.

Outspent by the opposition $120 million to $3 million, Rosenfield's tiny operation prevailed by tapping into the frustration of California motorists fed up with skyrocketing premiums. Despite dire predictions that carriers would flee the state, California's auto insurance market remains competitive. Premiums have declined by about 30%, saving Golden State motorists billions, according to the Consumer Federation of America.

Rosenfield said he's again resorting to a ballot initiative to allow California voters to do what the Legislature hasn't been able to do — rein in soaring health insurance premiums. Bills to give the state more authority to regulate rates have been bottled up in Sacramento for years; health companies and insurers have contributed millions to lawmakers to keep it that way, Rosenfield said.

Health insurance "fits perfectly with 103," Rosenfield said.

Insurance industry opponents counter that Rosenfield and his colleagues have other reasons for wanting to expand Proposition 103. Over the last two decades, they've reaped millions in legal fees and settlements from insurance companies while declaring themselves champions of the little guy.

Bacchi of the California Assn. of Health Plans criticized Consumer Watchdog as "a self-anointed consumer advocate," pursuing "yet another deeply flawed policy proposal that is ultimately designed to line their pockets with cash from expensive lawsuits."

Rosenfield, who has shaved his mustache, buffed up his physique and upgraded his wardrobe since his Nader's Raiders days in the 1970s and 1980s, said he welcomes insurer insults. That's "how I know we're doing our job," he said.

But the proposed health insurance initiative promises to earn Rosenfield more adversaries than usual.

Carefully inserted in the measure is a one-sentence "poison pill" that could nullify a proposed auto insurance initiative that's also aimed for the November 2012 ballot. The crafty tactic was aimed straight at Rosenfield's old nemesis: George Joseph, the chairman of Los Angeles-based Mercury General Corp., who is helping to bankroll the auto insurance measure.

That initiative, which would offer certain discounts to longtime insured motorists, would weaken Proposition 103, Rosenfield said, by effectively raising rates for drivers who were previously uninsured. Last year voters defeated a similar ballot measure, with the losing campaign costing Mercury $16 million. Undeterred, Joseph already has pumped $8 million into the new effort, which officially is sponsored by the American Agents Alliance, a trade group.

Rosenfield said his wording would restate and expand a controversial provision of Proposition 103 that previously uninsured drivers should not be penalized with higher insurance rates. It would take effect if both Rosenfield's and Joseph's measures were approved but Rosenfield's gets more votes.

The poison pill, insurers argue, is unconstitutional and is likely to be challenged in court on the grounds that initiatives by law can deal with only one subject.

Rosenfield contends that his measure would withstand such a challenge from insurers.

"We fight just as hard as we can for consumers," he said.

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