Prop. 45 Sparks Turf War Over Health Insurance Regulation In California

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SACRAMENTO — A turf war over health insurance regulation broke out in the Legislature on Wednesday, pitting the state's new health insurance-purchasing exchange against Insurance Commissioner Dave Jones and other supporters of a November ballot initiative.

Proposition 45 would give the insurance commissioner authority to review proposed health insurance premium rate increases and determine whether they are justified.

The measure has created a schism among some Democrats and interest groups aligned with Democrats. It is backed by Jones, U.S. Sen. Dianne Feinstein and the California Nurses Association. Opponents, in addition to the health insurance industry and health care providers, include several labor unions in the building trades and some of the most enthusiastic backers of Covered California, the health-insurance exchange created by the federal Affordable Care Act.

Former Assemblyman Dario Frommer, who helped pass legislation creating Covered California, now chairs the No on Proposition 45 campaign. He argued that Covered California is off to a successful start.

"If something is working well, why would we go in and create another layer of bureaucracy on top of it?" he asked.

At a hearing on the initiative conducted by the Senate and Assembly health committees, Covered California Executive Director Peter Lee asserted passage of the initiative would create uncertainty in the marketplace and potentially force insurers to focus exclusively on price at the expense of quality care.

"The plans would place a huge emphasis on rates," he said. "That would later ripple through the care being received by California consumers."

Covered California recently released a report raising serious concerns about the potential impacts of Proposition 45.

Testifying Wednesday, Jones asserted all of those concerns are unfounded. He said his department would be able to complete its rate reviews in time for approved rates to be in place at the start of Covered California's enrollment period each year. He also rejected opponents' implications that the initiative would give him authority to regulate non-price issues, such as benefit packages, co-pays and deductibles.

"The ballot measure is limited to rates and rates alone," he said. "This is the missing piece of the Affordable Care Act. If this doesn't pass, we continue with the status quo, which is ever-increasing health insurance rate hikes."

Jones noted that 35 states have the ability to review and approve proposed health insurance premiums.

Proposition 45 is modeled on Proposition 103, the 1988 ballot measure that established rate regulation for auto and property-casualty insurance policies. Under current law, the Department of Insurance and the Department of Managed Care, which regulates HMOs, review proposed rate increases, but their findings are not binding.

Jamie Court is president of Consumer Watchdog, the sponsor of Proposition 45. He urged Californians to examine the outcome of Proposition 103, another of his group's measures that passed despite a massive opposition campaign funded by the insurance industry. Twenty-five years later, he said, California is the only state in the nation in which auto insurance rates have declined in real dollars and it has one of the most competitive auto insurance markets in America.

"What you inevitably hear is that the sky is going to fall," Court said.

Charles Bacchi, lobbyist for the California Association of Health Plans, argued that "giving the insurance commissioner power to control prices is the wrong approach." He said if proposed rates are not approved in time for the annual open enrollment period for Covered California, insurers will be unable "to move forward with unapproved rates."

Assemblyman Richard Pan, D-Sacramento, suggested that rejection of proposed rate increases could ultimately force insurers to become underfunded, leaving consumers without access to care.

Jones said the regulatory process examines whether rates are excessive and are sufficient to cover projected losses.

The excess money in the system, Jones argued, is not going to pay for patient care.

"The money is going to excessive profits, executive compensation, excessive administration," he said. "That's where they're hiding the money."


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