As Republicans try to make President Obama's landmark health care law a key issue in the 2012 election, a leading California consumer rights group wants to shift the debate by offering a groundbreaking state ballot measure calling for a public option, a 20 percent rate rollback and tough oversight of premiums.

The initiative, aimed at California's November 2012 ballot, is being organized by Consumer Watchdog, the Santa Monica group responsible for Proposition103, the landmark 1988 ballot measure that established regulatory and cost oversight of state auto insurance rates.

Consumer Watchdog Executive Director Jamie Court said the proposal represents "about the only forward movement toward patients" in the U.S. health care debate since the Affordable Care Act, the president's bill that passed Congress last year. Republicans refer to it as "Obamacare."

"This will be a bellwether for America," Court said in an interview Wednesday. "If California passes a 20 percent rate rollback and the right of citizens to bypass private insurances in favor of a public plan, then every other major state will do that, too."

Direct-mail campaign

High rate increases in the individual insurance market, which serves customers who are not part of a group or employer plan, received national attention during the debate over federal health legislation last year when Anthem Blue Cross tried to raise rates as much as 39 percent on California policies.

Court said Consumer Watchdog plans to prepare the ballot measure language and submit it by November to the office of the state attorney general and then begin collecting the 700,000 signatures needed to qualify for the ballot.

Well-funded insurance firms might invest as much as $100 million to battle the ballot measure, Court said, adding that his organization plans on raising $6 million for a largely direct-mail campaign to voters.

Crucial hearing on rates

Such odds haven't derailed the feisty consumer group in the past: In 2010, Consumer Watchdog was behind the successful David-and-Goliath battle to defeat Mercury Insurance's $15 million effort to pass Prop. 17, which would have changed auto insurance rates.

News of the Consumer Advocate ballot measure comes as a critical hearing on a bill to regulate health insurance rates is scheduled today in the state Senate Appropriations Committee.

Assembly Bill 52, by Assemblyman Mike Feuer, D-Los Angeles, would allow the state insurance commissioner or the head of the Department of Managed Health Care – the two agencies that regulate health insurance – to reject or modify proposed rate increases if they are deemed to be excessive.

Regulators currently have the ability to review filings for rate increases for actuarial accuracy, but they do not have the ability to reject an insurer's filing for rate increases simply for being too high. California Insurance Commissioner Dave Jones, a Democrat, has long advocated for the commissioner to have the power to regulate rates. The bill passed the Assembly in June.

Opposition to law

"Opposition is mounting to AB52," said Patrick Johnston, chief executive office of the California Association of Health Plans, which represents the state's health insurers and opposes the bill. "The Legislature will certainly take into account the cost of the bill and the significant complications for public agencies, large employers, the business community of California and the cost estimates to the state."

The board of the California Public Employees' Retirement System voted last week to oppose the bill on the grounds that it would limit CalPERS' authority and increase costs. The state Department of Finance estimated the bill would cost $57 million in its first year for administrative and startup costs.

The Association of Health Plans remains committed to opposing any measure that would give regulators power over rates, whether in the form of a bill or ballot measure.

Bill or ballot?

But Anthony Wright, executive director of Health Access California, said the consumer advocacy coalition remains committed to supporting AB52 and trying to make it reach the governor's desk. While possible, a ballot fight would be costly and contentious and would face a "very well-funded opposition in the insurers," Wright said.

Time is also of essence, he said. A ballot measure like the one proposed by Consumer Watchdog would not reach the voters until November 2012, shortly before the key elements of the federal health law go into effect, including the provision that would require most Americans to obtain health insurance.

"We need to have aggressive oversight … (because) before the new rules go into effect in 2013, there is the potential for insurers to game the system and jack up rates," Wright said.

Anger with insurers

Court said that despite Republicans efforts to attack "Obamacare" as too costly, the mood of people is as angry today with health insurers as they were with auto insurers when Californians passed Prop. 103 in 1988, he said.

"People all across America wanted what they were promised on health care reform in 2008 – but the president failed to deliver," he said. The 2012 measure is "a huge opportunity" to convince voters that "this really is the only thing on the ballot that's going to move us forward. That's the big bet."

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