Angered by rapidly rising premiums for automobile insurance, voters approved Proposition 103 in 1988 to give the state insurance commissioner the power to veto unreasonable rate hikes for auto policies. Now, after years of premium hikes in health insurance, voters have the chance to extend that authority to individual and small-group health policies. Proposition 45 would let the commissioner reject any change in premiums, deductibles or related factors found to be excessive, inadequate or "unfairly discriminatory."
Proposition 103 has saved consumers an enormous amount on auto, home and other policies while still allowing insurers to make a profit, so the idea of extending its purview to health plans is appealing. But now would be the wrong time to pass such a measure. Thanks to the state's implementation of the 2010 federal healthcare reform law, buyers of individual health plans have a new ally that other insurance shoppers don't: an independent state exchange, Covered California, that negotiates with health insurers for better deals. Although many people don't shop for insurance through Covered California, insurers have to offer their Covered California plans to all state residents. Yet Proposition 45, which was written before Covered California opened for business last year, doesn't acknowledge the exchange or any of the other major changes wrought by the 2010 law.
The five other states with "active" insurance exchanges regulate health premiums, so clearly the two mechanisms can co-exist. The challenge is fitting them together so that all the work required to set premiums for the coming year — the preparation of insurance plans, the bargaining between Covered California and insurers, the subsequent analysis of the rates by the insurance commissioner, any challenges filed by public "intervenors," and any court reviews of the commissioner's decisions — can be accomplished before the start of the state's annual enrollment period, when consumers with individual coverage have their only opportunity to sign up for or change plans.
Proposition 45 doesn't try to coordinate these efforts. Instead, it leaves much of the timetable for filing and reviewing rates up to whoever happens to be the insurance commissioner, who may not have the ability or the desire to make the process work — or to stop intervenors determined to undermine it. Nor does it try to contain the damage that might be caused if a court throws out a rate months after it goes into effect, leaving insurers, policyholders and the government that subsidizes them to figure out who pays rebates to whom.
The proposition also inexplicably gives the insurance commissioner authority to set rates for all individual and small-group plans, even though most of them are now under the jurisdiction of the state Department of Managed Health Care. That department would still be obligated to review those plans' premiums too. Meanwhile, Proposition 45 would undermine Covered California's ability to bargain with insurers to create a range of options for consumers by letting the insurance commissioner reject practically any element of each plan the exchange approves.
It's too early to tell whether Covered California will be an effective negotiator that keeps health premiums reasonable. The changes instigated by the 2010 healthcare law are still rippling through the system. But Covered California should be given the chance to fulfill its mission to the best of its ability before the state adds another layer of complexity to an already complex process. Sacramento may eventually need to regulate health premiums, but now's not the time and Proposition 45 isn't the way.
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