Initiative To Regulate Health Insurance Hikes Sparks Big Debate

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Initiative would regulate health care

To the woman who spends as much as $1,000 in a month on medical care and argues she saves money by not having insurance, the proposal makes sense.

Force health insurance companies to gain government approval before they impose rate hikes on individuals or employers.

"While they're at it, they can hit Exxon, too," said Mary Ryan, 61, of Camarillo, contending her history of skin cancer means that if she bought insurance, her premiums would cost $1,100 a month. She's no fan of government regulation, but the nonstop rise of premiums convinces her health insurance is one place Big Brother belongs.

"Of course," she said. "Why isn't it into stuff like that?"

The state's largest insurers, the California Medical Association and the California Hospital Association are fighting a proposed ballot initiative that would empower California's insurance commissioner to reject excessive rate hikes.

Leaders of Consumer Watchdog, an advocacy group that backed a landmark initiative 24 years ago to bring similar regulation to car, home and many other forms of insurance, are scrambling to qualify the proposition for the Nov. 6 ballot.

The watchdogs have collected more than 350,000 signatures but say they need more than 400,000 additional supporters by no later than mid-May. That number has pushed advocates to shuffle from what started as an all-volunteer grass-roots campaign to paying people to collect signatures. Consumer Watchdog President Jamie Court predicted it will cost $1 million to get the initiative on the ballot.

In the meantime, a battle royale likely will intensify, with both sides accusing the other of hidden agendas. Opponents say the initiative would open the door to a government takeover of health insurance while also allowing consumer advocates to rake in money through fees given to groups that fight proposed rate hikes.

"They're gambling that people will submit a knee-jerk vote and create a program that will be a cash

cow for consumer attorneys," said Dr. Paul Phinney, a Sacramento pediatrician and president-elect of the California Medical Association, a physicians organization.

Advocates say the opposition is focused on defeating the initiative now because it knows the measure will win if it qualifies for the ballot.

"They polled it, and they know it polls off the charts," said Court, noting surveys from Consumer Watchdog suggested at least 70 percent of Californians support rate regulation. "There's no question it's going to lower health insurance rates. It's going to change the balance of power."

As part of federal health care reform, insurance companies currently must submit proposed rate increases to the California Department of Insurance. State Insurance Commissioner David Jones can try to leverage companies into changing proposed hikes by threatening to label them as unreasonable, but he can't block them.

The proposition would change that as of Nov. 6. Insurance companies would have to justify rate increases, which would also go through public hearings. The law would also allow consumers to pursue refunds if existing premiums were deemed too high.

The proposal follows several failed attempts to pass similar laws in Sacramento.

Three of those attempts were authored by Jones, an assemblyman from Sacramento before he became insurance commissioner in 2010.

The initiative is based on Proposition 103, authored by Consumer Watchdog founder Harvey Rosenfield and approved by voters in 1988. It rolled back rates for many types of insurance — but not health — and gave the insurance commissioner the power to deny rate increases for many forms of property and liability insurance.

Ben Pfister, a Ventura teacher, has grown weary of seeing premiums increase. He doesn't know the details of the proposed initiative, but the concept intrigues him.

"It sounds wonderful to have some check and regulation," he said.

But if insurance premiums alarm consumers, others worry the initiative would arm a more dangerous threat: government.

"I don't think the government has any place regulating a free business," said Mike Joseph, a Camarillo painter.

Marvin Bryan, a retired general contractor from Upper Ojai, was more succinct. "The less government the better," he said.

The California Medical Association, which represents 35,000 doctors in California, is fighting the coalition.

That doesn't faze Dr. Mohammad Gharavi, a Thousand Oaks heart and lung surgeon who complains the cost of insuring his practice's employees has doubled in five years. Rising premiums hurt patients more, he said.

"I think there should be some control," Gharavi said, noting he's wary of regulation but is more fearful of the profit motive driving private insurers. "If I had a choice of insurance companies controlling it or the government controlling it, I'd rather have the government."

The initiative forces the insurance companies to pay fees that would fund the cost of the rate regulation program.

Phinney of the California Medical Association said insurers won't absorb the costs but will pass them on to consumers, meaning a larger chunk of premiums will be spent on rate regulation and not medical care.

"It's going to make it more difficult for more people to get the care they need," he said.

Court said the administrative costs will be a drop in the hat for insurance companies. He noted 34 other states and the District of Columbia give insurance regulators power to approve health insurance rate hikes.

But legislative proposals in California — opposed by health care organizations — have consistently failed.

"It's time for the voters to have their say," he said.

Both sides are unleashing uppercuts. Opponents contend Consumer Watchdog is motivated by the fees the initiative would give advocates and lawyers who intervene to block proposed rate hikes. Court said the California Medical Association is involved because it's indebted to Kaiser Permanente for the membership fees paid for the HMO's doctors.

Each side denies the other's accusations. Fireworks often accompany rate regulation battles, said Anthony Wright, executive director of Health Access.

"This is a political fight waged between a very popular concept and powerful interests with lots of money," Wright said. His advocacy group has backed previous fights for rate regulation but won't take a position on the Consumer Watchdog initiative until it qualifies for the November ballot.

The coalition opposing the initiative is funded largely by Kaiser Foundation Health Plan, Anthem Blue Cross, Health Net and Blue Shield. Coalition spokeswoman Jennifer Wonnacott said the insurers and others are worried the initiative gives insurance commissioner Jones too much power.

Federal health care reform empowered government to review rate increases. The review contributed to four insurance companies reducing proposed increases by an average of 9.7 percent, according to a federal government report.

"That actually saved over 87,000 Californians a total of $1.6 million per month in premium increases," said Wonnacott, arguing the reviews are working.

But the current system relies on insurance companies agreeing to lower rate increases, said Wright. Advocates say the proposal doesn't mean rate hikes will be rejected, but rather that insurance companies will have to prove increases are needed.

The initiative has coalesced hospitals, insurers and physician associations, groups that often fight bitterly. They're strange bedfellows because of the shared fear the initiative will lead to a single-payer insurance system controlled by the government, said Jim Lott, executive vice president of the Hospital Association of Southern California.

"I think the proposition, unfortunately, has a very good chance of passing," he said, citing the possibility of refunds off existing rates. "It's offering them a rate cut right off the top. I think it's going to be very tempting for them."

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