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Californians Split Over Letting Official Veto Insurers’ Rate Boosts

THE WALL STREET JOURNAL
http://online.wsj.com/articles/californians-split-over-letting-official-veto-insurers-rate-boosts-1412803775

Californians are split over a high-profile voter initiative that opponents say could complicate the future of President Barack Obama ’s health-care law in one of the states that has gone furthest to embrace it.

Proposition 45 would grant California’s insurance commissioner new powers to veto health-insurance premium increases for individual and small-group policies, a popular sentiment in a state that has seen large rate jumps in the past, though they have recently moderated.

Some prominent Democrats, including Sens. Dianne Feinstein and Barbara Boxer, have endorsed the measure, which would also grant citizens and outside groups the power to delay health-insurance rate increases by requesting a government review.

The measure is strongly opposed by health insurers, who have donated tens of millions of dollars to defeat it. Opponents say the measure could hamper efforts to further implement the health-care law in California, which spent more time and money than any other state building its insurance exchange, Covered California. They say Covered California’s power to negotiate with insurers on behalf of consumers would be weakened, and that federal subsidies could be hard to price for many of the low-income people who dominate the exchange.

“It starts to raise very serious questions about the certainty of what Covered California will be able to negotiate with the insurance companies…and even whether some plans will be available,” said Rep. George Miller (D., Calif.), one of the Affordable Care Act’s co-authors. “The problem is Prop 45 was written before we got to the final stages here” of the ACA.

Prop 45 was originally drafted for the 2012 election, but the measure failed to qualify for the ballot in time. Since then, Covered California has become the most robust exchange in the country, signing up 1.4 million people during the last enrollment period.

The new powers under Prop 45 would broadly enhance the influence of Dave Jones, the Democratic state insurance commissioner. Since taking office in 2011, he has said that a missing piece of the health law was the lack of authority to reject insurance rate increases.

The idea of imposing tighter controls on the insurance industry is popular in California, where a 39% rate increase proposed by Anthem Inc. drew national attention just as the debate in Congress over the ACA was heating up. The most recent poll about Prop 45 from Field Research Corp. showed 41% of California registered voters in favor, 26% opposed and the number unsure at 33%.

 

Mr. Jones has run a populist campaign in favor of Prop 45, saying his opponents are either aligned with the insurance industry or ideologically opposed to controlling rate increases. In an interview, Mr. Jones said the new powers would enhance the exchange’s negotiating power and called them “entirely consistent with the Affordable Care Act.”

Opponents say the state already has a complicated regulatory structure, with some health plans overseen by the state’s Department of Managed Health Care, others by the insurance commissioner and another group of plans covered by Medi-Cal Managed Care. “We’ve got three-plus layers of regulation as it is,” said Susan Kennedy, a Democrat on Covered California’s five-member board. “Adding another layer of regulation—with conflicting regulatory powers and objectives—is another example of California’s schizophrenic policy-making through the initiative process.”

Mr. Jones’s partner in the Prop 45 fight is a longtime foe of the insurance industry, the nonprofit Consumer Watchdog of Santa Monica, which wrote the popular 1988 initiative that gave Mr. Jones’s office the power to regulate rate increases in auto and property insurance.

Opponents of the measure paid $50,000 for Jon Kingsdale, a former executive director of the Massachusetts exchange who now works for health-care consultancy Wakely, to produce a report that focused on the role of outside groups in California’s insurance system. The report concluded that about 5.6% of premium increases for auto and property insurance are challenged by outside groups, resulting in delays of about a year.

Such delays could upend the state’s ability to price consumer subsidies offered by the ACA, according to independent experts who have read Mr. Kingsdale’s report. “It creates the potential for serious complications with respect to Covered California,” said Larry Levitt, senior vice president at the nonprofit Kaiser Family Foundation. “There are major concerns.”

Jamie Court, president of Consumer Watchdog, contested Mr. Kingsdale’s findings, saying health insurers would be motivated to resolve challenges from an outside group quickly, given the nature of the enrollment process. He said other states, such as Connecticut, Maryland and New York, have all been successful at operating exchanges while at the same time maintaining the authority to regulate rates.

The health-insurance industry has thrown its financial weight against the measure. Kaiser Permanente, WellPoint Inc. and Blue Shield of California are among the largest contributors to the “no” campaign, Californians Against Higher Health Care Costs, which has raised $37.6 million to defeat the initiative, according to MapLight, a nonpartisan, nonprofit organization that tracks campaign contributions. Kaiser, Blue Shield and WellPoint declined to comment, referring calls to the campaign.

Write to Alejandro Lazo at alejandro.lazo@wsj.com