A California ballot initiative allowing the state insurance commissioner to reject health insurance rate increases would disrupt the new health care overhaul, destabilizing negotiations between the exchange and insurance companies and inviting costly legal challenges by outside organizations, according to an analysis released Thursday.
The report, commissioned by Californians Against Higher Healthcare Costs – a group of doctors, hospitals and health plans opposing the measure – concludes it would undercut new authority afforded to Covered California. It was performed by Wakely Consulting Group's Dr. Jon Kingsdale, an expert on health care funding and the former head of the Commonwealth Health Insurance Connector Authority in Massachusetts.
Kingsdale said the state exchange should be given time to work.
"One could decide three, four years into health reform that competition is not working, so let's take a different approach," said Kingsdale, an adviser to the Obama administration on the health care law. "This would be asking the voters to decide less than one year into a whole new approach. We don't even know until the end of this year what kind of rate increases we are going to see for next year. It feels like it's absolutely the wrong time."
The initiative on the Nov. 4 ballot is being advanced by Santa Monica-based Consumer Watchdog and Insurance Commissioner Dave Jones. It seeks to provide the commissioner's office similar regulatory authority that it wields over property, casualty and automobile insurance.
Jamie Court, president of Consumer Watchdog, took issue with the figures analyzed in the report (the authors say they got them from the Department of Insurance). He said the study dramatically overstates the delays resulting from outside rate challenges.
Since 2002, the group successfully intervened in 71 non health insurance cases for a savings of $2.9 billion. But he said most the savings resulted from an "informal deterrent effect."
"We have saved huge amounts of money for (consumers) because insurers know better than to raise rates," Court said.
What's more, challenged rates remain in effect until there's a resolution – so there's reason for the insurers not intervenes, to draw out the process, he said.
He said health insurance companies that helped fund the study don't want public scrutiny of the process. The real purpose of the study is to scare the public by influencing the nonpartisan Legislative Analyst's Office's fiscal analysis of the measure, Court said.
Under the health care overhaul, Covered California has more leverage than state regulators because it can refuse to offer a plan on its exchange. The regulators, including the Department of Insurance and Department of Managed Health Care, may determine a plan's rates are unreasonable. Such conclusions have motivated insurers to on occasion reduce their rates – including two last year.
Kingsdale concludes the new rate-review process would tack on another external evaluation to the myriad already required for each of the hundreds of filings annually, with increased administrative costs borne mostly by ratepayers. The added oversight would undercut the negotiating influence of Covered California because any rates would be second-guessed and potentially changed by the insurance commissioner.
It also would encourage so-called interveners to challenge rates as long as the insurance department determines that the outside groups represent the interests of customers. The interveners, according to the report, would require an additional 11 months on average and as much as two years in some cases. That's in addition to the 10 months required to develop and approve qualified plans.
"It would just be, frankly, chaotic were (the Department of Insurance) or an intervener to do anything with this for the next year's rates," Kingsdale said.
Wakely Consulting Group was paid roughly $50,000 for the 38-page analysis, said Robin Swanson, a spokeswoman for the opposition. It was peer-reviewed by Dr. James Robinson, chair of the Center for Health Technology at the University of California, Berkeley, she said.