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Need for ballot measure on health insurance rate regulation debated

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Voters will decide whether to give the insurance commissioner veto power over health insurance rate increases
For now, state regulators have limited power over health insurance rates

Kicking off a major ballot fight this year, California lawmakers pressed the state's insurance commissioner to defend a proposal that would grant his agency sweeping new authority over health insurance rates.

At a legislative hearing Wednesday, backers and opponents of the statewide ballot measure on health insurance rate regulation called Proposition 45 squared off for the first time in a public debate. Before the hearing, supporters of Proposition 45 rallied in Sacramento and accused health insurers of putting profits ahead of patient care.

As medical costs keep climbing, California Insurance Commissioner Dave Jones and consumer groups are pushing for more authority on health premiums for about 6 million Californians who are covered by individual and small-business policies.

In November, voters will decide whether to give the insurance commissioner veto power over rate increases.

For now, state regulators have limited power over rates. They can deem health insurance increases unreasonable, but they can't stop health plans from imposing them.

One major point of contention Wednesday was whether Proposition 45 will be a help or hindrance to making the Affordable Care Act work for consumers. California was a leader nationally in signing up 1.4 million people in Obamacare coverage during the first year of the health law rollout.

Jones said Proposition 45 is fully compatible with the federal health law and essential to shield consumers from rising premiums.

"This is the missing piece of the Affordable Care Act," Jones told lawmakers at the hearing. "Without health insurance rate regulation, we will continue to see excessive rates."

Since 2011, health plans have proceeded with 14 rate increases in the state that were deemed excessive by regulators, according to a report by the California Public Interest Research Group. Those rate increases have affected an estimated 923,000 Californians.

Consumer Watchdog, the Santa Monica advocacy group that gathered signatures to put Proposition 45 on the ballot, said those rate hikes that couldn't be blocked instead have cost Californians an additional $253 million.

Insurers and their allies fiercely oppose Proposition 45. They say the federal health law and new state insurance exchange make further regulation unnecessary and could actually undermine those reforms.

Some state lawmakers and other groups that support the Affordable Care Act share those concerns.

In particular, some critics worry about another set of rules in addition to what's already included in the health law. They said they also worry about the ability of outside groups to challenge proposed rate increases and create lengthy delays.

"It's clear the initiative will almost immediately make our healthcare system a mess," said Charles Bacchi, executive vice president at the California Assn. of Health Plans.

Peter Lee, executive director of the Covered California health insurance exchange, said his agency is still reviewing the potential effects of Proposition 45. He said he was confident that timelines could be adjusted to accommodate additional rate review.

But Lee said the new regulatory approach could harm the exchange's ability to negotiate with health plans over rates, their provider networks and other benefits. He also said there may be increased risk of insurers withdrawing from the market under this system.

"The only thing we can be sure of is the uncertainty," Lee said.

Backers of Proposition 45 say any operational issues can be overcome and the insurance commissioner can impose firm deadlines and expedite any reviews.

There was also considerable debate Wednesday over the extent of the powers the insurance commissioner may hold if Proposition 45 passes.

Some health-policy experts said the language of Proposition 45 goes beyond merely reviewing rates and could allow the insurance commissioner to make changes to health plan benefits and features such as co-payments and deductibles.

Jones disagreed with that analysis. He said the insurance commissioner would include all those factors into the department's review but the ballot measure only grants power over rates.

Many consumers statewide have felt the pinch of rising rates. Premiums for employer health insurance in California have jumped 185% since 2002, more than five times the 33% increase in the state's inflation rate, according to the California HealthCare Foundation.

At the hearing, San Rafael resident Josh Libresco said the Anthem Blue Cross premiums for his family of four have skyrocketed to $2,132 a month, along with higher deductibles and co-pays.

"I think the initiative is long overdue," Libresco said.

This initiative on health rates is patterned after Proposition 103, the 1988 ballot measure that gave the insurance commissioner authority over auto, property and casualty insurance rates and established the process for outside groups to intervene.

The fight over Proposition 45 is expected to be an expensive battle this fall.

Health insurers have already contributed more than $25 million to defeat Proposition 45 through a group called Californians Against Higher Healthcare Costs, state records show. Industry giant WellPoint Inc., which runs Anthem Blue Cross, has led the way by giving $12.8 million, and the state's biggest HMO, Kaiser Permanente, has contributed $7.4 million.

On the other side, Consumer Watchdog said it has raised more than $2 million for its campaign.

chad.terhune@latimes.com

Twitter: @chadterhune

Copyright © 2014, Los Angeles Times
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