The prospect of broad new powers has drawn four major-party candidates seeking their parties' nominations in the June 8 primary election: Democrats Hector De La Torre and Dave Jones, and Republicans Brian D. Fitzgerald and Mike Villines.
Most of the key provisions of Obama's reform program will kick in during the next insurance commissioner's four-year term. Much of the work will fall on the states and their insurance regulators.
"There's an added dynamic," said De La Torre, of South Gate. "The insurance commissioner will have a significant role … one where you can do more good for millions of Californians."
The insurance commissioner has plenty of authority even without any new duties. Though not well known by the public, the commissioner and the Insurance Department affect nearly every Californian who insures a car, a home, property, life or health.
The department is one of the largest state bureaucracies, with 1,150 employees, a $210-million annual budget and principal offices in San Francisco, Sacramento and Los Angeles. The commissioner's job comes with an annual salary of $139,189.
Under Obama's national health care reform, the commissioner must implement protections for people who have insurance and set up nonprofit exchanges that will use group buying power to offer economical coverage for those who are uninsured.
The candidates all endorse efforts to give the commissioner wider powers to oversee all types of health care insurance. The insurance commissioner now regulates only conventional health insurance companies, particularly those that sell coverage to people who get their insurance as individuals and not through employer group plans.
Health maintenance organizations, the most widely used type of coverage, are the responsibility of the state Department of Managed Health Care, whose director is appointed by the governor.
California is one of only 10 states to have such divided oversight, a situation that could be remedied if the Legislature approves and the governor signs a new law that shifts all regulatory power to the insurance commissioner, candidate Villines said.
"It makes sense with all the federal health care coming down," he said.
Having two government agencies doing parts of the same function is "very confusing to voters, and industry is able to take advantage of the separation," Jones said.
Creating a single, elected health insurance regulator could prove to be a difficult task. Insurance companies and even some consumer advocates have a stake in keeping the current system, industry observers note. Plus, an incoming governor might not be eager to give up his control over HMOs.
Jones, though, said he wants to go beyond implementing the new federal laws on health care. He's pushing lawmakers and the governor to give the insurance commissioner new powers to approve or reject insurer requests for rate increases, such as the recent effort by Anthem Blue Cross to raise premiums on individual policies in California by as much as 39%.
Jones would subject health insurance rates to the same detailed approval process that applies to automobile, home and other types of property and casualty insurance under Proposition 103.
Jones' proposal, in a bill now before the Legislature, is supported by De La Torre and Fitzgerald. Last year, Villines voted against a nearly identical measure.
Proposition 103, an initiative approved by voters in 1988, turned the job of state insurance commissioner from a governor's appointee to an elected office. The initiative also transformed parts of the insurance industry into a highly regulated business, similar to electric utilities.
All four candidates praised Proposition 103 for bringing fairness, stability and competitive rates to California's insurance market.
"I'll be working to impose rate regulation on health insurance and health care plans to rein in the excessive rate increases that have afflicted California consumers year after year for the past 10 years," Jones said.
Villines said the next commissioner needs to pursue a balanced approach that protects consumers but ensures companies can compete and earn a fair rate of return on their investments. He also would encourage insurers to innovate.
"I'd like to see new products out quicker," he said. "The more you have competition, the better it is for the consumers."
A newly empowered state Insurance Department needs a solid administrator who knows the institution, not another "termed-out legislator," said Fitzgerald, a veteran attorney of the department.
"My concern is you need somebody from the outset who knows how to get things done," he said.
Fitzgerald, who has spent less than $5,000 on his campaign, conceded that his candidacy is a long shot.
Jones and De La Torre each have raised more than $600,000 so far and have put a modest number of television commercials on the air. Villines, the expected GOP choice in the primary, plans to spend most of the $250,000 he raised so far on the campaign for the November general election.
All four candidates have pledged not to take campaign contributions from the insurance industry, which has not endorsed anyone in either of the two primaries. Nor has any candidate yet been endorsed by major consumer advocates, such as Proposition 103 author Harvey Rosenfield.
Though California has had just three elected insurance commissioners in the last 22 years, it's already clear that whoever runs the Insurance Department can have a huge effect on a big part of the California economy, said Amy Bach, executive director of United Policyholders, a consumer advocate.
"The department can cut through a lot of red tape for people," she said. "The department can save people a lot of money."