Proposition 45 Seeks Health Insurance Rate Review

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Proposition 45 offers a simple choice for voters: Do they want the state insurance commissioner to regulate health care rates for small businesses and individual health plans?

The campaign fight over whether that would be beneficial for consumers is much more complicated.

Initiative proponents, led by Democratic Insurance Commissioner Dave Jones and Consumer Watchdog, a Santa Monica-based consumer group with backing from attorneys, say the initiative would add transparency to the rate-setting process and force health insurance companies to justify their decisions.

Opponents, including a coalition of hospitals, doctors and firefighters with major funding from health plans, say it would have a detrimental effect on California's ability to deliver lower-cost health coverage under the Affordable Care Act. They say it's a flawed initiative that would give too much power to the insurance commissioner.

The online marketplace known as Covered California launched in October 2013 as part of the state's implementation of the federal health care reforms. The exchange, which is responsible for directing Californians to an appropriate health plan, offers private coverage to those with no access to health care on the job and provides premium subsidies to most.

While the board of California's new health insurance exchange declined to take a formal positon, Covered California staff did released a report critical of Proposition 45. It found the initiative, if passed, could disrupt the exchange's work negotiating with health insurance companies, cause delays by allowing third-party challenges and risk having insurers leave the market.

Some 1.4 million people signed up for individual health insurance coverage through Covered California during its first year of operation. In July, the exchange announced that premiums for those consumers will rise by an average of 4.2 percent in 2015, about half the increase the industry has seen in the past three years.

"I personally have some very serious concerns about the interaction of the plain language of this initiative and the work that we've invested in making the Affordable Care Act real in California and to some considerable degree somewhat successful," said Covered California Board Chairwoman Diana Dooley, secretary of the state Health and Human Services Agency.

Proposition 45 supporters say the initiative will not disrupt the new marketplace or cause delays for consumers. Instead, they say it would bring protections to the roughly 6 million Californians who buy health insurance through individual and small group markets.

While state regulators would still review health insurance rates, passage of Proposition 45 means the insurance commissioner would have the sole authority to approve or deny them.

"All it does is bring health insurance under the rate regulation we have for auto, home and business insurance in the state," said Jamie Court, president of Consumer Watchdog.

Micah Weinberg of the Bay Area Council said it's not accurate to compare health insurance to home or auto insurance. While consumers can buy auto and home insurance any time of the year based on their actuarial risk, health insurance has open enrollment for a limited time each year. Under the federal health care reforms, the market also has changed so that health plans cannot discriminate against people based on pre-existing conditions.

The state also set up its exchange to provide choices for consumers depending on how much they want to spend, he said.

Both sides are trying to make their case by asking voters to follow the money.

Opponents say the initiative benefits trial attorneys who collect fees for intervening on behalf of consumers. Backers of Proposition 45 say they will be outspent by major health insurers. As of mid-September, most of the more than $37 million in opposition funding has come from four major health plans, Kaiser, Anthem, Blue Shield and Health Net.

Jones, an attorney who is running for re-election, said just because he believes health care can be improved does not mean he opposes the Affordable Care Act.

"I think that some people on the left feel so beleaguered by the opponents on the right that they're critical of things like Proposition 45 because it suggests there needs to be something done to improve the Affordable Care Act. And I think that's a sad state of affairs," Jones said.

He is being challenged by Republican Sen. Ted Gaines of Roseville, who opposes Proposition 45.

"I don't need the additional power," he said.

An insurance agent, Gaines said he believes Jones has not done enough to increase competition and would like to review the department's budget, which he claims has increased since Jones took office.

Jones said he has been successful at saving businesses and consumers $1.6 billion in auto, home and other property and casualty rates by rejecting excessive rate increases.

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