CA Prop 45 Analysis

Posted by Jack, analysis by John Myers, sponsored by KQED  (This was about the most straight forward and fair analysis I could find on Prop 45)

• Require health insurers to publicly disclose and justify their rates
• Give the state insurance commissioner power to approve or reject those rates
• Allow the public to challenge rates in court
• Require insurers to pay a fee to cover the costs of implementing the measure

The backers of Prop. 45 – a proposal to give California’s independently elected insurance commissioner greater power over health insurance rates – expected it to be on the November 2012 ballot. That was a presidential election with the largest voter turnout in California in years, at a time when the future of federal health care reform was a very big – but not quite settled – issue.

Trouble was, backers submitted voter signatures so late that election officials couldn’t verify them in time for 2012. That pushed the proposal to this fall.

And that’s an important piece of history. The Affordable Care Act’s impact in the state, through the Covered California exchange, is now much more solid than it was in 2012 – and as such, some question whether Prop. 45’s time has come and gone.

Prop. 45 would essentially shift and consolidate some – but not all – of the power over health insurance rates into the hands of the independently elected insurance commissioner. For years, that power has been dispersed between the commissioner, who is elected by voters, and the state’s Department of Managed Health Care, under the control of the governor.

And therein lies the fight over Prop. 45. Supporters say this power shift would be a good thing, while critics say it would be a disaster. And the truth: No one knows for sure.

It’s true that Prop. 45 could create some wrinkles in the way Covered California operates, especially if health insurers decide to simply pull out of the state exchange if they dislike a ruling by the newly empowered insurance commissioner.

It’s also true that incumbent Insurance Commissioner Dave Jones, a proponent of Prop. 45, has clashed with Covered California’s leaders several times in the past year over insurance rates that the exchange has negotiated; this initiative would give him some new muscle.

And it’s true that analysts have raised questions over language in the initiative that refers to 2012 insurance rates in the individual and small business markets. Remember, this was supposed to be on the 2012 ballot. Would that mean the insurance commissioner could retroactively go back and start cancelling existing rates … and possibly ordering refunds from insurance companies?

Prop. 45 was modeled on the 1988 initiative that established a system to review and reject auto and home insurance rates deemed too high. The backers of that 26-year-old initiative are the same ones behind this expansion into health care.

In the end, voters have to decide whether to bestow some new power on the insurance commissioner over the cost of health care, or whether this initiative’s 2012 expiration date has long since passed, making it unworkable in 2014.  END   Courtesy of the California Proposition Guide

I’m divided on this one, even though supporters and opposers are pretty much defined along party lines.  Democrats want the legislation and Republicans don’t and for some that’s reason enough to vote yea or nay.   But, I wanted to dig deeper on this one and get as much information as possible without the partisan influence.  I noted right off that supporters have raised less than a million and the opposition which includes the big 4 insurance companies, have raised about 50 million.   So we know the big 4 don’t like it! 

What it boils down to is the insurance commissioner’s office would have the power to reject a rate hike subject to proof.  If their decision is rejected the insurance company can take them to court.  We do this with rate hikes in the public utilities sector.  Without this proposition the burden of proof falls on the people to show cause why the rate hike should be repealed.   Under the ACA people (insured) don’t have a choice – they must buy health insurance, but the ACA has also added some safeguards to stop rate spikes.   Still, this makes us vulnerable to some rate hikes because we can’t vote with our feet.  We’re stuck with so few carriers it wouldn’t take much to have us facing a virtual monopoly, not unlike the petroleum industry in California.   If this was a free market enterprise situation it would be a no brainer, I would vote it down in heart beat, but its not.   So, I cringe at the prospect of having government price controls.  Given the mandatory compliance foisted on us it makes the decision on Prop 45 fairly complicated, but I’m leaning to NO on 45.