In Race for Insurance Commissioner, Unions Playing Key Role

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Few statewide political jobs in California are more important – or more poorly understood – than that of state Insurance Commissioner.

The commissioner can seize and license companies, decide rates, investigate wrongdoing, ride herd on insurers’ conduct in a $124 billion market, regulate brokers and agents, handle some health-coverage plans and even protect consumers.

“This is the position with the most direct impact on Californians’ pocketbooks,” said Doug Heller of Consumer Watchdog. “There is no other single entity in the state with that kind of direct power.  The insurance commissioner has a crucial role, not just for individuals, but for businesses, too.”

With all that clout – and a $211 million state budget culled from insurers’ fees, 1,200 employees and 1,500 companies to regulate – one might think that the office of insurance commissioner would be an obvious stepping stone to governor, or even attorney general or the U.S. Senate.

In fact, that has never been the case in the 20 years that the position has been filled by popular election. The commissioner used to be an appointee of the governor, but in 1988 voters approved Proposition 103, which required the commissioner to be popularly chosen at the next statewide election.

Of the elected officials who held the position since 1990 when it first became an elected job – John Garamendi, Charles Quackenbush and Steve Poizner – all tried and all failed, dramatically, to get elected governor.  

Indeed, Garamendi, a long-time state lawmaker, former lieutenant governor and now a member of Congress, tried repeatedly for the governorship, including two times as commissioner. The state had two other commissioners since 1990: Trouble-shooter J. Clark Kelso, who served for nine weeks in 2000 in the wake of Quackenbush’s scandal-driven, forced resignation, and Harry Low, a retired judge who was appointed to temporarily serve out Quackenbush’s unexpired term.

But in the end, the job of insurance commissioner, whether elected or appointed, doesn’t provide much of a springboard.

“For one thing, it (an elected insurance commissioner) is still relatively new, only 20 years old. And when you put it next to the treasurer and attorney general and the controller, it has less of a profile,” said Sam Sorich, president of the Association of California Insurance Companies, which is neutral in this year’s race.  

“Also, it kind of gets lost, because when the candidate for commissioner is running, you usually have the governor running or a U.S. Senate race, and I think the public can only absorb so much,” he added.

However low on the public’s radar, the campaigns for insurance commissioner get hot and heavy for the businesses and interest groups – especially the trial bar and insurers – that have a stake in the commissioner’s decisions.

The campaigns for insurance commissioner are viewed as high-stakes fights between insurance-industry backed Republican candidates on one side and trial lawyer-backed Democratic contenders on the other.

But in increasing numbers, a new player is emerging on the field: labor unions.

In part, that’s because the insurance commissioner could be playing a larger role as the federal health-care reform program unfolds in California. Also, labor groups see health care benefits as a collective bargaining issue – a position that potentially could conflict with the soon-to-be-created Health Insurance Exchanges – and want a powerful ally in the commissioner’s office. The so-called HIEs, part of the federal health care reform effort, would set up a government-run marketplace in which millions of people could purchase coverage. Health care reform advocates lauded the creation of the HIEs.

“Everybody in the fabric of the community where our members live is impacted by the decisions that the commissioner makes,” said Willie L. Pelote Sr. of the American Federation of State, County and Municipal Employees, which supports Jones. “It’s not about ‘labor versus the insurance industry,’ it’s that the community should win and not the insurance industry."

The commissioner also has role in workers’ compensation insurance issues, although much of the oversight of workers’ comp is handled by others, including the Division of Workers’ Compensation.

“The commissioner doesn’t have a direct impact on workers’ comp benefits or the administration of the system. But he does have a role in regulating insurers, so perhaps labor wants to make sure the commissioner is sensitive to labor’s concerns,” Sorich noted.

Sacramento lobbyist Barry Broad, who represents the Teamsters, the Longshoremen and other labor groups, said several factors are driving labor support.

“You’re seeing two things. One is that (Democratic candidate) Dave Jones is a really good fundraiser. Two, is that in a down ticket race, if a Republican is elected then (later) you have potentially a candidate for governor or U.S. Senate,” he said.

Another issue, he added, is health care, “because when you make insurance mandatory, the cost of insurance ceases to be just an economic matter but becomes a matter of public concern. For labor, he added, “a lot of issues are coming together to raise the profile of this particular race.”

Thus far, the two main contenders in the commissioner’s race, Jones of Sacramento and former Assembly GOP Leader Republican Mike Villines of Fresno, have directly raised about $4.5 million between them. Jones, with $3.34 million, has out-raised Villines about 2.5-to-1, according to state financial disclosure records.

Jones has taken in at least $422,000 from lawyers and, by one estimate, nearly $1 million from labor, which generally backs Democrats. The unions include the California Teachers Association, SEIU, the Plumbers and Steamfitters, state employee groups, the Building and Construction Trades Council, among others.

Villines, meanwhile, with $1.34 million, is backed primarily by business interests, developers, chambers of commerce, agricultural groups, the financial services industry and others. There is some direct money from the insurers in his campaign.

The indirect spending in the campaign has attracted attention. A business-backed committee financed in part by insurer donations has attacked Jones, and a state Chamber of Commerce group has spent $2 million on Jones.

The dollars are not huge – compared to the governor’s race, they are miniscule.

Nor are they complete, because more money is all but certain to pour into the race from all sides within the final weeks of the election. The Oct. 15 filing period looms, and reports detailing the spending are due by Oct. 22 – a major disclosure deadline for all California statewide races.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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