Maybe they should have been on Santa Monica.
There, the same group that put together the landmark Proposition 103 insurance regulatory initiative began work on a 2010 ballot initiative that would apply Proposition 103-style rules over the alphabet soup of health care organizations such as HMOs, PPOs, PHPs, PDPs, PSOs, and many, many more.
“We are going ahead with this,” said Jamie Court, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “The only thing that would block this is if the single-payer (universal health care) folks want to go ahead and go to the ballot, or if a new president wants to do something more ambitious. In that case, we would back off.”
Proposition 103 was narrowly approved by 51 percent of the vote after an 11th-hour campaign sweep by national consumer advocate Ralph Nader. It was one of five competing, insurance-related measures on the November 1988 ballot that together sparked a $100 million ballot campaign. The head of Court’s organization, attorney Harvey Rosenfield, authored Proposition 103, which for two decades has been viewed by insurers as unfair and politicized, as well as a cash cow for the foundation. But Proposition 103’s advocates — and there have been many in the Legislature — disagree, saying that without that initiative there would have been no effective watchdog over the $80 billion insurance industry. Court is involved in crafting the newest ballot initiative, as are others at the foundation. If the political fight over Proposition 103 is any indication, the health care initiative is all but certain to spark a spending frenzy.
The plan would remove HMOs from the regulatory authority of the state Department of Managed Health Care, which is headed by an appointee of the governor, and place them in the California Department of Insurance, which is run by a publicly elected commissioner. It would order HMOs and others to get their rates approved in advance by the state and force them to justify those rates; rates judged to be “arbitrary or capricious” would be thrown out. Rescinding coverage after an illness sets in would be outlawed. Extra costs for special services, the so-called “outof- pocket maximums” — would be capped, as would prescription drug costs. Patients would not be penalized for changing doctors or care plans. The HMOs and others would be required to submit detailed financial information to state regulators, who would have the authority to penalize companies for violations and seize and operate companies whose fiscal condition was suspect. There would be language making it easier to sue HMOs and others, and those who bring lawsuits in furtherance of the initiative would be compensated for their time — as in Proposition 103.
Health insurers have not seen the language of the proposed initiative. But from what they’ve heard, they are skeptical. “As you describe it, it sounds like the foundation is going in the wrong direction. They should be trying to get to get a handle on the increasing costs of health care,” said Margita Thompson, a spokesperson for Woodland Hills-based Health Net. Others are skeptical, too, but for different reasons. Unlike other forms of insurance, most workers obtain health coverage through their employers, so any regulations should not conflict with federal law, which governs employer-based health coverage. Property-casualty coverage — such as auto and homeowners insurance — is different from health insurance.
“It’s a different dynamic, and it’s more challenging to regulate health coverage and make sure the benefits actually go to the workers instead of the employers,” said Beth Capell of Health Access, a grass-roots group with ties to organized labor that seeks to expand the number of people with affordable health care. “The foundation has been talking about regulating health since the day Proposition 103 was passed. Occasionally, we’ve even seen drafts. But it’s difficult. For an employer who purchases health care coverage, if the premiums go down that means the employer pays less, but it doesn’t mean the employee pays less. That’s the bottom line: to make sure it benefits the employees.”
“The real question,” she added, “is whether the regulators understand health care and whether they have the competence to really regulate it. It doesn’t do us much good if health care is cheap because premiums are lower but nobody can get it.”
Transferring authority over health care to the Department of Insurance also raises doubts. A 78-page study by J. Clark Kelso, a law school professor who headed the Department of Insurance temporarily after the departure under fire of former Commissioner Chuck Quackenbush, said the CDI and DMHC are different animals, and he noted that the two types of regulatory function had been split in California for 60 years. In theory, a single regulator may be preferable, but in practice there could be difficulties, Kelso said.
The strength of the DMHC is “its exclusive focus on health care, the development of a consumer grievance program with specified timelines for resolution … an independent medical review system, its quality of care monitoring and its consumer health care education programs,” while the CDI is strong in “its financial surveillance programs, its ability to respond to consumer questions and complaints from an insurance perspective, and its national connections to regulators in other states who regulate, indeed a global insurance market.”
Kelso currently serves at the behest of a federal judge as the head of the state prisons’ troubled health care system.