In more than 30 states, government insurance departments have the authority to reject what they determine to be excessive rate hikes for health insurance. But not in California. Earlier this month, consumer advocates launched a drive to put an initiative on the November ballot to let voters decide if California's Insurance Commissioner should have this power.
"Right now, my sole authority over rates, if I find a rate to be unreasonable, is to sentence a health insurer to my website," joked Dave Jones, California's Insurance Commissioner, in an interview.
That's a bit of an overstatement, as his department does review rates, making sure the math is right and ensuring there are no inaccuracies. Still, what the Department is left with is "whatever element of the bully pulpit we have to try to rein those rates in," Jones says.
Before he was Insurance Commissioner, Jones served as an Assemblyman. He says he introduced legislation in the State Assembly every year for seven years to give the Insurance Commissioner more authority over health insurance rates. But his bills never passed. When he was sworn in as Insurance Commissioner a year ago, he again authored legislation. It went through the House, but is a handful of votes short in the Senate, he says.
"After having tried to accomplish this through the legislature for the last seven years," Jones says, "I know only too well how influential the HMOs and the health insurers are in the state legislature. Time and time again, they've been able to block this legislation, so I think it's time we took this issue to the voters of California."
Enter Consumer Watchdog--the Santa Monica advocacy group that in 1988 backed Proposition 103. While most Californians associate Prop. 103 with auto insurance rate reform, the law also gives the Insurance Commissioner the right to reject rate hikes in property and casualty insurance. Now Consumer Watchdog is behind an effort to give the Insurance Commissioner the same level of authority over health insurance rates. To quality for the November ballot, the group needs 505,000 valid signatures by May.
"We're trying to get on the November ballot and we're doing it with as much volunteer energy as we can," said Jamie Court, President of Consumer Watchdog. "This is basically about making sure health insurance companies publicly justify their rates under penalty of perjury before they take effect. It's all about getting approval from the government."
U.S. Senator Dianne Feinstein has long backed this increased regulatory control. Today her office provided an email where the Senator says she was the first person to sign Consumer Watchdog's initiative. "Consumer Watchdog's ballot measure would require health insurance companies to publicly justify their rates before rate hikes take effect," Feinstein wrote in the email.
In an opinion piece in the Sacramento Bee last summer, Feinstein wrote:
Since 1999, average health insurance premiums for family policies have risen 138 percent, while medical inflation rose just 31 percent, putting insurance out of reach for millions of Californians.
For Valerie Burchfield-Rhodes of Laguna Niguel health insurance is still within reach, but at tremendous cost. She says health insurance is her family's biggest household expense each month, "substantially more" than their mortgage. In 2010, her family was paying $1,053 monthly, but in 2011 their premium jumped 36 percent to $1,434 a month with the highest deductible available to them--$7,000.
"I flipped out," she told me. "I was writing letters and contacting people and calling reporters and freaking out because it was so expensive." She estimates her family is currently paying $24,000 annually between premiums, the deductible and co-pays for some of her husband's treatment for diabetes.
But health insurers say additional regulation is unlikely to be a panacea. "Rate regulation may sound appealing," said Steve Shivinsky, a spokesman for Blue Shield said last week in the L.A. Times, but "It will layer in another complex bureaucratic level of rate review that will gum up the system."
Insurance Commissioner Jones anticipates a different response from health insurance companies. "Now what the insurers argue [is] 'oh my gosh, if we give the Insurance Commissioner that authority, it's going to be the end of the world as we know it, and we're all going to stop writing insurance. We're going to leave the State of California.' In fact, they made that argument in 1988," Jones says in a reference to the Proposition 103 campaign. "But in truth what happened was they continued to write insurance in California, we continue to have all of the major national insurers still writing insurance in all these product lines and they make a reasonable profit. But what was the best thing about Prop. 103, it saved consumers and business tens of billions of dollars."