Wall Street Journal
SACRAMENTO — Legislation expected to be introduced this week would create a new statewide organization to represent consumers of auto, home and health insurance before industry and government regulators.
Sen. Tom Hayden’s legislation, in the form of amendments to Senate Bill 1738, would create a new nonprofit public corporation called the Insurance Policyholder and Patient Association. Membership would be open to all Californians, who would pay a minimum $10 annual membership fee and elect a board of directors for their association.
Insurance companies vehemently oppose the plan. But Mr. Hayden, a Los Angeles Democrat, is seeking the backing of the Legislature’s most powerful figure — Senate President pro Tempore John Burton, a San Francisco Democrat. Under Sen. Hayden’s proposal, the association’s volunteer board would have the authority to hire paid attorneys and other consumer advocates to monitor the insurance industry as well as the state Department of Insurance, the newly created state Department of Managed Care and that department’s Office of Patient Advocate.
Among other tasks, the association would conduct independent research on the quality and cost of insurance; represent consumer interests before the Legislature and state agencies; and intervene in insurance-related proceedings before administrative and judicial bodies.
The nonprofit corporation needs legislative approval because it would use the Department of Motor Vehicles’ regular mailings to help recruit members. What’s more, it would direct the state insurance commissioner and authorize the Managed Care Department director to require private insurers to include membership solicitations in their mailings, too. The insurance commissioner and the managed-care director would have to approve the brochure as “content-neutral and neither false nor misleading.”
Insurance Commissioner Chuck Quackenbush has not seen the legislation and chooses not to comment on it, according to a spokesman. Daniel Zingale, the new director of the Department of Managed Care, says he shares “the principle of encouraging consumer involvement, but I’m focused on my responsibilities” in his new job and is not prepared to comment on the measure’s specifics.
But Dan Dunmoyer, president of the Sacramento-based Personal Insurance Federation of California, says his group of insurance companies is definitely opposed. For starters, Mr. Dunmoyer questions whether it’s constitutional for the Legislature to create such a corporation. In addition, he says the association would “make it impractical, if not impossible, to sell a product, adjust a claim or to simply do day-to-day business in California without the involvement of yet another layer of bureaucracy and micromanagement.”
The proposal’s sponsor, the Foundation for Taxpayer and Consumer Rights in Santa Monica, says the goal is not to increase insurers’ costs but to provide consumers with the highest level of scrutiny possible in analyzing the quality and costs of insurance.
“Experience has shown that [consumers need] to have their own representatives on the scene 24 hours a day, to provide an alternative to the massive insurance lobby,” argues Harvey Rosenfield, president of the consumer group.
The association would be based on the Citizens Utility Board model conceived by consumer activist Ralph Nader in the 1970s. Today, statewide consumer organizations monitor electric, gas, water and telecommunications utilities in Illinois, Oregon and Wisconsin. Closer to home, there is a CUB-modeled organization called UCAN, for Utility Consumers’ Action Network, that represents and advocates for 40,000 members in San Diego County.
Charles Langley, publisher of UCAN’s newsletter, says consumer groups organized on the citizens utility board model “tend be very effective watchdogs. They’re not ridden with the problems in entrenched government bureaucracies.”
UCAN, Mr. Langley says, has “really paved the way for the successful resolution of a lot of difficult problems.”
For example, he says, San Diego Gas & Electric’s rates were among the highest in the country when UCAN was launched in 1983. Today, he boasts, the utility’s rates are among the lowest in the state.
Doug Kline, a spokesman for Sempra Energy, San Diego, which is San Diego Gas & Electric’s parent, says he “wouldn’t attribute [the utility’s more-competitive rates] to UCAN solely.” The utility has made many other significant changes that affect its rates, says Mr. Kline. Among other things, it made a cost-saving shift in the 1980s to buying more power to meet its demand rather than building new power plants.
Even so, Mr. Kline says, “There’s no question that UCAN has been an active participant in the process and certainly contributed to consumer interests and certainly has been a formidable adversary in the regulatory process.”
Should Mr. Hayden’s legislation succeed and spawn the CUB-like organization for insurers, says Mr. Kline, “participants in those industries should definitely take them seriously.”