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Prop. 45: Meaningful Health Insurance Regulation

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By Mark Wilson, Esq. on October 06, 2014 12:29 PM

This is the fifth in a series about this year's California ballot propositions. Hopefully we can help sort out the wheat from the chaff when it comes to claims about what these propositions do and don't do. In case you missed them, here are our discussions of Propositions 46, 47, 48, and the missing-in-action Prop. 49.

Remember the Affordable Care Act? Yeah, it was in the news from time to time. California was one of the states that set up its own state insurance exchange. Currently, the state health insurance exchange, Covered California, negotiates rates for plans offered on the exchange.

The Status Quo

If you believe opponents of Proposition 45, Covered California is the "independent commission" that they claim already has the power to "negotiate rates with health plans and reject them if they're too expensive." On this point, you probably shouldn't believe opponents -- because that claim isn't true.

The state's nonpartisan Legislative Policy Analyst notes that, currently, health insurance regulation is split between the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI). These departments can review health insurance rates, but "DMHC and CDI currently do not have the authority to reject or approve rates before they take effect."

What Prop. 45 Does

In 1988, voters passed Proposition 103, which placed regulation of auto and homeowners insurance in the hands of the state insurance commissioner. The commissioner must review and approve changes to insurance plans, and before such changes take effect, there's a notice and hearing period. After the rates are put in place, there's the opportunity for judicial review.

Prop. 45 merely applies all of these regulations to health insurance, too. That's it. It also specifies that "absence of prior insurance coverage, or a person's credit history" can't be taken into account to determine rates for auto, homeowners, or health insurance. That's pretty nice.

Harry and Louise, Redux

So, contrary to claims made by the commercial featuring the kindly old man at the hardware store, there currently is no "independent commission" with the power to regulate prices. And as for the argument that the "commission" (whatever that is) should be left alone to operate, we've seen the results of that. Dave Jones, the current state insurance commissioner, said in July that the price of individual health care plans in California increased between 22 and 88 percent this year.

Basically, Prop. 45 opponents are asking that we just let the market work -- even though we have let the market work, and that big increase was the result. On the other hand, Prop. 103 has been working for 26 years, and in that time, it's saved state auto insurance customers over $100 billion, according to the Consumer Federation of America -- and that's just auto insurance.

Opponents of Prop. 45 also claim that placing control of premiums in the hands of "one politician," who will apparently be subject to "millions in campaign contributions from special interests," is contrary to good public policy. This claim seems to cut severely against the Prop. 45 opponents, who consist of the largest insurance companies in the state. Are they suggesting that if Prop. 45 is passed, then they -- the insurance companies -- will then attempt to ply the state insurance commissioner with campaign contributions? ("I swear, if you pass this proposition, then we'll have no choice but to bribe the insurance commissioner to be able to charge higher rates!")

So don't necessarily believe that kindly old hardware store employee who, for some reason, hates insurance industry regulation. Read up on Prop. 45 and decide for yourself.

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