Prop. 45: Dems split over regulating health care rates

A high-stakes ballot measure going before voters Nov. 4 has divided California Democrats, with the state party and some of its most prominent supporters on opposite sides. The initiative, Proposition 45, would empower the state’s elected insurance commissioner to approve health insurance rates.

Opponents include Democratic Gov. Jerry Brown’s top health-care adviser, an array of medical, organized labor, insurance and business groups, including the California Chamber of Commerce, various HMOs, the State Building and Construction Trades Council, the California Medical Association, SEIU, and retiring Rep. George Miller, D-Martinez. The state’s largest newspapers have editorialized against the initiative. Three health care insurers – Kaiser Foundation Health Plan, Wellpoint and Blue Shield – donated $36.3 million alone to fight the measure.

“This proposition is not about consumers versus insurers,” says initiative opponent Micah Weinberg, senior policy adviser for the Bay Area Council, a business group.

The California Democratic Party and U.S. Sens. Dianne Feinstein and Barbara Boxer, both Democrats, support Proposition 45, as do the California National Organization for Women, the Consumer Attorneys of California and the California Consumer Federation. The pro-Proposition 45 coalition has raised about $3.5 million.

The measure was placed on the ballot by Consumer Watchdog, the same group – under an earlier name – that successfully pushed for the passage of Proposition 103 in 1988. That landmark measure that created the position of a publicly elected insurance commissioner and gave the commissioner rate-approval authority over automobile insurance and other kinds of coverage.

But much has changed since then, according to the foes of Proposition 45.

“This proposition is not about consumers versus insurers,” says initiative opponent Micah Weinberg, senior policy adviser for the Bay Area Council, a business group. “It is largely a conversation among supporters of the Affordable Care Act, about how to best control health care costs and hold health insurance companies accountable,” he told a recent health care conference in Sacramento.

A well-heeled industry, says Harvey Rosenfield, has used its resources to influence “every state or local official, campaign consultant and activist they could.”

Not so, says Harvey Rosenfield, who wrote Proposition 103. He said the dynamic of a special interest – health care insurers – spending millions of dollars to protect profits is at the core of Proposition 45 as it was at the center of Proposition 103.

“It’s really amazing how similar the situation is now,” Rosenfield, the founder of Consumer Watchdog, said in a written statement. A well-heeled industry, he added, used its resources to influence “every state or local official, campaign consultant and activist they could. Commentators bought the ‘sky is falling’ threats from the industry and its surrogates in government.”

Fund-raising by the two sides is lopsided. The opponents of Prop. 45 have raised about $38 million, while the backers of the initiative have raised about $3 million, according to state financial disclosure documents.

About half of the 1,702 likely voters polled in September by the Public Policy Institute of California favor Prop. 45, with 38% opposed and 14% undecided. But a Sept. 11 Field Poll showed that support for Prop. 45 was dropping, with 41% of likely voters inclined to vote yes, 26% on the no side and 33% undecided.

In voting on Proposition 45, voters also will consider whether the commissioner’s regulation of health insurance rates would jeopardize the role of Covered California, the health insurance exchange created through the Affordable Care Act. Covered California, an online portal and marketplace for health insurance coverage, allows consumers to shop for the best price among an array of plans.

In California’s implementation of the Affordable Care Act, Covered California serves as the “active purchaser” and can restrict insurers’ entrance to the pool by requiring them to adhere to rules set up by Covered California.

The five-member governing board has not taken an official position of Proposition 45, but some members – including Chair Diana Dooley – have expressed opposition to the initiative.

Back in 2010, when legislation established Covered California as the nation’s first state-run health insurance exchange, officials decided to give the board the ability to function as an “active purchaser,” which experts say means it can select a relatively small number of health plans to compete in California’s marketplace.

Some 34 other states use a federally-operated health insurance marketplace, know as the “clearinghouse” model, which means that the insurers’ plans only need to meet a certain set of criteria in order to join the insurance pool, from which consumers can purchase their coverage. Eight states and the District of Columbia run their own exchanges using the clearinghouse model. The rest of the states, including California, use the “active purchaser” design.

In California’s implementation of the Affordable Care Act, Covered California serves as the “active purchaser” and can restrict insurers’ entrance to the pool by requiring them to adhere to rules set up by Covered California. That, in turn, means that Covered California has influence over rates, because to participate in the marketplace, insurers will be encouraged to competitively price their products.

Other states following the active purchaser model include Vermont, Massachusetts, New York, Rhode Island and Oregon, according to the Kaiser Family Foundation.

Covered California reports that consumers have enjoyed lower-than-expected health insurance premiums since the state exchange’s debut, and some staff and board members believe Proposition 45’s provisions would disrupt Covered California’s role.

The measure “would undermine our ability to act as an active purchaser,” David Panush, Covered California’s Director of External Affairs, said at a recent health care conference in Sacramento co-sponsored by Capitol Weekly and UC’s Sacramento Center.

One issue is whether the legal intervention will cause delays in providing coverage.

Despite concerns over the measure, the appointed members of Covered California, a public agency, decided against having the board take an official position on Proposition 45.

Dooley, head of the state’s Health and Human Services Agency and chair of Covered California, said her personal opposition to Proposition 45 is “very clear,” saying the measure “goes at the heart” of what Covered California is doing.

“But I certainly don’t support us taking a formal vote on the matter,” Dooley said. Being a public body prohibits Covered California from campaigning, added Dooley, the Brown administration’s top health care adviser.

The agency also expressed concern about Proposition 45’s intervenor provisions – similar language was in Proposition 103 – in which groups such as Consumer Watchdog challenge rate hikes on behalf of consumers in legal proceedings and recoup their fees from the Insurance Department, which is financed largely by the insurance industry. One issue is whether the legal intervention will cause delays in providing coverage.

There were “concerns about the role of the intervenor process that was contemplated through the initiative in the same way the Proposition 103 has intervenors, and would those intervenors… affect our timelines?” said Panush, director of external affairs for Covered California. “And underlining all of that is that the health insurance market post the Affordable Care Act is very different than auto-insurance or the personal casualty world.”

Under Proposition 103, consumers saved an estimated $102 billion on their auto insurance since the measure went into effect in 1988, according to a November 2013 report buy the Consumer Federation of America.

Proposition 45’s backers say the interventions allow enable consumers to get top-drawer representation against the insurance industry, which has vast resources to fight legal battles.

“Our opponents rail about the compensation that Consumer Watchdog has received, but our participation since 2002 challenging auto, home and malpractice insurance rate increases has saved policyholders $3 billion since 2002. In that time, we’ve received about $8 million in intervenor fees,” said Carmen Balber of Consumer Watchdog. “Half of which really never came to our organization at all, we just passed straight through to our outside experts.“

Consumer Watchdog’s critics say the group wrote language into the partly for its own financial benefit.

“While the Consumer Watchdog would like to think this is something very different, the truth is that they from the get-go have included provisions where they can charge $675 an hour and they stand to gain tens of millions of dollars off the initiative. So they definitely are no white knight,” said Robin Swanson, a spokesperson for the Proposition 45’s opposition.

Balber said her organization only received about 25 cents for every $100 consumers saved since 2002. “So we think [the intervenor process is] crucial protection for consumers who otherwise would’ve paid $3 billion in rate increases,” Balber said.

“The average rate in Oregon for consumers next year is a rate decrease of over 4%. So consumer participation, in conjunction with a regulator who can actually reject a rates, has meant millions in savings for Oregon. And obviously with the larger size of the health care market in California it could save billions for Californians.”

Under Proposition 103, consumers saved an estimated $102 billion on their auto insurance since the measure went into effect in 1988, according to a November 2013 report by the Consumer Federation of America.