UPDATED: California’s initiative to regulate health insurance rates sinks in polls

UPDATE, Oct. 27: A Hoover Institution internet poll that was released Oct. 27 showed 42 percent of likely voters supporting Proposition 45, compared to 30 percent against. That sharply contradicts a poll released last week by the Public Policy Institute of California, which found 46 percent of likely voters opposing the proposition and 39 percent in favor. The Hoover poll was conducted over the period of Oct. 3-17.

More recently, a new Field Poll conducted Oct. 15 to 28 found 30 percent of respondents supporting Proposition 45, with 42 percent against, according to the Sacramento Bee.

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Over the summer, passage of Proposition 45 looked like a sure thing. Field polls indicated that nearly 70 percent of voters approved of the initiative, which will grant California’s elected insurance commissioner the ability to approve or reject proposed health insurance rate increases.

But as the election grows near, support for Proposition 45 has fallen in the polls. The San Francisco Chronicle reported in late September that only 41 percent of surveyed voters supported the measure, while 26 percent were opposed and 33 percent remained undecided.

Supporters say the initiative will help keep health insurance rates in check by increasing transparency and holding insurance companies accountable. The proposed oversight is modeled on Proposition 103, passed in 1988 to regulate rate increases for automobile and property insurance. Though California is often ahead of the curve when it comes to new regulations, in this case it is behind 35 other states that have already adopted similar measures.

Kaiser Health News reported that in just the past four years, insurers have implemented at least 14 rate hikes that California regulators might have otherwise turned down.

If passed, Proposition 45 will only impact oversight of individual and small businesses health plans — 16 percent of the market. But that 16 percent, about 6 million Californians, includes people who purchase insurance through Covered California, a nascent program that has expanded options for the state’s lower income population.

Opponents say it gives the insurance commissioner too much power and will add levels of bureaucracy that could actually harm Covered California, set up under the national Affordable Care Act to be the state’s health insurance exchange.

The insurance industry is most heavily invested in defeating the measure. The Yes on 45 campaign reported that total insurance industry spending is now more than $55 million, compared to about $6 million raised by supporters. There are also concerns that the additional oversight will result in a longer approval process, which could delay health insurance products on the market. In turn, that could decrease options for consumers and negate the aims of Covered California, which is to encourage a robust market through healthy competition.

Even so, supporters led by Consumer Watchdog say the initiative will help check runaway health insurance rate increases. The California Legislature tried to pass similar bills, most recently in 2011. In 2012, supporters gathered enough signatures for a ballot initiative, but it was too late for that election year. 

Because of that delay, the initiative is worded to give the commissioner authority starting in 2012. It’s not clear whether rates could be retroactively reviewed.  

Officially, Covered California has remained neutral on the initiative, but the Sacramento Bee has reported that some Covered California board members strongly object to the initiative. They say it could impede their efforts to negotiate in good faith with insurance companies.  

“Even if you believe that rate regulation is the right thing to do, now is not the right time to make the job we are in the middle of any harder,” Susan Kennedy, a Covered California board member and former aide to Govs. Arnold Schwarzenegger and Gray Davis, told the Bee.

Los Angeles Times’ columnist Michael Hiltzik, quoting from an Aug. 21 Covered California board meeting, found Kennedy opposing the initiative in even more dramatic terms:

It's going to end up hurting Californians, hurting consumers, increasing costs, and it will damage healthcare reform, perhaps permanently, perhaps fatally, in California and I think perhaps nationally.

Currently, Covered California negotiates rates with insurance companies. The insurance commissioner reviews any rate increases and can comment, but the commissioner does not have the power of approval offered by Proposition 45. Its implementation would add a layer of logistics. Covered California officials say the additional oversight could be difficult since it would require coordination between multiple agencies and could make it difficult to meet a strict deadline that ends with a fixed open enrollment season of only three months.

Some of the questions raised by officials, summarized by the Bee include: the timeline for rate reviews; implications for the 2015 plan year; rate changes not approved by the beginning of open enrollment; and whether Proposition 45 also has input over benefit design and the adequacy of provider networks.

The California Legislative Analyst’s office issued a report that estimated the additional costs of implementing the measure around a few million dollars, paid for by insurance companies.

Given how much insurance companies have spent on campaigning against the initiative, that doesn’t seem like a big expense (although their bigger fear may well be lower profits due to potential rate-increase denials). Should Proposition 45 pass, the bigger question is whether Covered California and the insurance commissioner can find a way to work together so that Californians benefit from the additional oversight of insurance rates.

Photo by CA Dept of Insurance via Flickr.