We all must buy health insurance, but California is one of the few states that does not guarantee that it be affordable. Proposition 45 creates that guarantee for individuals and small businesses who must buy their own health insurance and often suffer the most.
If you buy your own health insurance and don’t receive a subsidy, health insurance can be a rip-off. Premiums in California have risen 185 percent since 2002 – five times faster than the rate of inflation. Recently, $250 million in proposed rate hikes for individuals and small businesses were deemed unreasonable by regulators, but they had no power under state or federal law to stop them.
In an August Field Poll, voters expressed support for the Affordable Care Act but dismay at the law’s inability to hold down rates. Thirty-five other states have the power to stop excessive rate hikes, but not California. Proposition 45 gives California that authority. .
Proposition 45 requires health insurance companies to justify price hikes and get permission before raising rates for 6 million individuals and small businesses. It makes the elected insurance commissioner the umpire over whether increases are excessive. It creates transparency and accountability, including requiring health insurance company CEOs to request permission for rate hikes under penalty of perjury.
Health insurance companies are spending $37.5 million – and counting – against Proposition 45, falsely claiming that voluntary government negotiation is enough to keep rates low. But can government purchasing power have enough leverage when four health insurance companies control 94 percent of the market of the purchaser, Covered California?
Consumers need Proposition 45’s regulatory stick, as well as Covered California’s negotiation carrot.
Rate regulation was the missing link in the Affordable Care Act. That’s why Proposition 45 is supported by some of the law’s biggest boosters, including Sens. Dianne Feinstein and Barbara Boxer, and the Democratic Party.
In 35 other states, consumers have access to health insurance exchanges, and rate regulation can further reduce their costs. Policyholders in Oregon, Maryland and New York recently saw big reductions because insurance regulators ordered lower rates than those negotiated.
Why should Californians be entitled to any less? Proposition 45 creates rate regulation that will complement the purchasing power of the exchange. The free market is just not enough to constrain health insurance company greed, particularly when four companies control the market.
Proposition 45 simply extends to health insurance rates the successful regulation of auto and home insurance that voters enacted in 1988 through Proposition 103. California drivers now pay less in real dollars for insurance than they did 25 years ago – the only state with such success. And California has one of the most competitive auto insurance markets in America.
Key to that success was not only establishment of an elected insurance commissioner, directly accountable to the voters, but also the same consumer participation system that applies to electricity rates. Consumers can challenge unreasonable auto, home and business insurance rate hikes. Since 2012, more than $3 billion in proposed rate hikes have been stopped by consumer challenges.
Proposition 103’s rate relief has proved an undeniable consumer triumph for drivers, homeowners and businesses. Policyholders required to buy health insurance under federal law deserve the same protection.
Jamie Court is the proponent of Proposition 45 and president of Consumer Watchdog.