Almost three decades ago, a small band of consumer activists persuaded California voters to slap tough new rate regulations on auto insurance.
Now that same group wants to crack down on health insurance rates.
And the insurance industry and its business allies are back with a multimillion-dollar war chest to fight Proposition 45 with an omnipresent media campaign.
The combination of big money and complex regulatory issues makes Proposition 45 a tough issue for voters, said Larry Levitt, a senior policy analyst at the nonprofit, nonpartisan Kaiser Family Foundation, unrelated to insurer Kaiser Permanente.
"You have interest groups lined up on both sides; all making a case that they are on the side of consumers," he said. "It's hard for voters to sort out who actually is on their side."
Proposition 45 would give California's elected insurance commissioner new powers to deny insurer requests for health insurance rate increases, if deemed excessive. Such veto power, which already exists in 35 other states, is similar to the commissioner's authority to deny auto and property insurance premium hikes given to the commissioner by voters in 1988 with passage of Proposition 103.
Health insurance, under current law, is regulated by two agencies, the Department of Insurance and the Department of Managed Health Care. Both agencies can review proposed rates but cannot deny them.
The initiative on the Nov. 4 ballot would apply only to about 6 million Californians who purchase their own health insurance or get it through a small employer. It doesn't apply to large employer plans or people on Medicare or Medi-Cal.
Proponents say Proposition 45 is the only logical way to keep the cost of individual health insurance in check. Opponents call the initiative an overreach that would give too much power to the insurance commissioner and create a complex and costly new bureaucracy.
The battle pits consumer advocates, labor unions, Democratic Party activists, trial lawyers and state Insurance Commissioner Dave Jones against a coalition of doctors, hospitals, health insurers and other medical providers.
When it comes to campaign cash, it's a lopsided fight. Health insurers and hospitals are spending lavishly to make their case in television advertisements and other media buys. To get out the pro-Proposition 45 message, proponents mainly are relying on "free" news and media stunts such as delivering steer manure to a health insurer's office.
Opponents have raised $43 million so far this year to fight Proposition 45, according to the California secretary of state. Almost all the money came from health insurers, including Kaiser Permanente, Blue Shield of California, Health Net Inc. and WellPoint Inc., parent company of Anthem Blue Cross in California.
Proponents, led by Santa Monica activist group Consumer Watchdog and the Consumer Attorneys Assn. of California, have reported about $2.7 million in contributions.
Perhaps the biggest issue that has emerged so far is the role of Obamacare and the state health exchange, Covered California. It negotiates rates charged by health insurers for individuals and small businesses.
Opponents of Proposition 45 say Covered California has already had success at keeping rates under control. Proponents disagree, saying the exchange is just a tool of insurers.
Jamie Court, Proposition 45's author and president of Consumer Watchdog, insists that only strict regulation would keep premiums reasonable — and that there is no substitute for an independent regulator like the insurance commissioner.
Premiums for employer coverage in California have soared 185% since 2002, more than five times the 33% increase in the state's inflation rate, according to the California HealthCare Foundation.
"The public understands that health insurance rates are excessive, and the only way to keep them down is if government can say no to rate hikes," Court said. "This is not a philosophic question. It's a question of keeping dollars in people's pockets."
Over the last 12 years, California insurance commissioners have rejected insurer requests for more than $3 billion in rate hikes for auto, property and medical malpractice insurance, Consumer Watchdog claims. Similar savings could be captured from health insurers if Proposition 45 passes, the group contends.
Opponents counter that it's foolhardy to give so much power to the current and future insurance commissioners. They contend that the lengthy rate-approval process would interfere with Covered California.
Health insurers and their allies also are wary of allowing Consumer Watchdog and other so-called public interest intervenors to participate in the hearings and be compensated for their legal work.
Covered California's board officially has remained neutral on Proposition 45. But the agency's director, Peter Lee, said he fears that passage of the initiative would undermine the exchange's ability to negotiate the lowest possible rates with insurers and that some companies may exit the market.
Covered California says it's worried that it might miss crucial deadlines if it has to wait for the insurance commissioner to approve rates, especially if the process gets drawn out with appeals and other delays. Insurance Commissioner Jones says his office can impose firm deadlines and expedite any reviews.
Health insurance rate regulation, which has failed to pass the Legislature on several occasions in recent years, is out of date, contends Martin Gallegos, a lobbyist for the Hospital Assn. of Southern California.
Voters should "not mess" with Covered California, he said. "It's early, it's working and needs more time to play itself out."
In the meantime Gallegos' campaign is running television spots featuring a pair of actors identified as small-business owners.
With ominous music playing in the background, they warn that Proposition 45 threatens policies sold by an unnamed "independent commission" — meaning Covered California. The actors also say they're worried that rate regulation would "give too much power to one politician" — that would be the insurance commissioner — while enriching "special interests" — code words for Consumer Watchdog.
But the real special interest is Covered California, counters Proposition 45 spokesman Court. The Associated Press reported recently that the agency issued nearly $200 million in no-bid contracts, including many that went to firms whose principals have ties to Lee, its executive director. Covered California confirmed that it had issued no-bid contracts but said they were needed to tap the contractors' skills quickly to launch the exchange on time.
Court asked the California attorney general's office to investigate. A spokesman for Atty. Gen. Kamala D. Harris declined to comment.
The negative advertising appears to be affecting Proposition 45's early popularity.
A Public Policy Institute of California poll, released Sept. 23, showed support at 41% of voters surveyed earlier in the month. But 26% were opposed and 15% were undecided. That's down from an early summer poll with 61% in support, 16% against and 15% undecided.
The dropping favorable numbers, combined with the complexity of the issue and the lack of passion on the part of voters, doesn't bode well for passage of Proposition 45, said Dan Schnur, executive director of the Jesse M. Unruh Institute of Politics at USC.
"It's a very, very rare initiative that grabs enough public attention to overcome significant spending against it," he said. "With the exception of a relatively small number of people, there's no one who feels very passionate about which government entity oversees healthcare premiums."