CALIFORNIA ELECTIONS / INSURANCE COMMISSIONER : Focus Shifts to Health Coverage

A lackluster and apparently one-sided campaign for California’s first elected insurance commissioner has taken a turn away from the high-profile battle over auto insurance to the potent issue of health coverage.

With the problems of auto insurance bogged down in court over Proposition 103, Democratic candidate John Garamendi is refocusing his campaign on a pledge to make available to every Californian a health insurance policy by the end of his four-year term.

Because of his commanding lead in the polls and in raising contributions, Garamendi has been able to set the tone for the race against Republican Wes Bannister. Bannister has staked out a different position on the health insurance issue, blaming the lack of coverage on the Legislature rather than the insurance industry and proposing that physicians and hospitals curb their costs to make coverage more affordable.

More than 5 million Californians do not have health insurance. Many of these either have their medical treatment paid through welfare programs or go without it. Attempts to solve the problem with legislative action have run into heavy opposition from special interests allied with the insurance and health industries.

Sounding more and more like an anti-industry candidate, Garamendi recently accused insurers of practicing discrimination in their sale of health insurance.

“They are increasingly becoming insurers only for the healthy,” he told a meeting of the Valley Business Alliance in Burbank. “It is becoming routine that if one member of a small business comes down with a serious illness, that business either loses its health insurance altogether or a rider is attached to its policy writing the sick person out of coverage.”

Garamendi promised, if elected, to work for establishment of a system of “community rates,” under which all residents of a particular region would be covered at the same rate regardless of whether they are sick or healthy.

In an interview, Bannister said he opposes the Garamendi plan, contending the real problem is that the Legislature “has mandated that too many coverages be offered. We need to cut costs and one way to do this is to cut the number of mandated coverages.”

Bannister said he opposes “community rates” because those who are ill ought to be charged more than those who are healthy. He also indicated he would require price sacrifices by doctors and hospitals--setting ceilings for what could be charged for covered procedures--rather than directly limiting what insurers could charge.

Garamendi backs legislation to require employers to buy health insurance for their employees, although he has suggested a state subsidy for small businesses that are financially hard-pressed. Bannister said it is often too costly for employers to cover their workers, and he does not favor state subsidies to bring the cost down.

These sharp differences on health insurance reflect the differing views on virtually all insurance issues held by Garamendi, 45, a Northern California legislator for 16 years who resigned to seek the insurance post, and Bannister, 53, owner of a Huntington Beach insurance agency.

Garamendi, in auto as well as health insurance, would put most of the burden to change the insurance system on the insurers. Bannister would try to save the insurers money by cutting back on coverage benefits, and then pass the savings to consumers in the form of lower premiums.

In auto insurance, Bannister favors a no-fault system that would reduce attorneys’ profits from accident litigation and deprive accident victims of most damages for pain and suffering. He says cost savings of as much as 35% could be passed on to customers.

Garamendi opposes no-fault and would retain damage payments for pain and suffering. He proposes to cut costs and litigation by requiring companies to pay their claims more promptly.

Garamendi also has suggested creation of a nonprofit state company to provide minimum auto coverage if it proves impossible to induce private auto insurers to voluntarily provide a low-cost policy.

Bannister is flatly opposed to state-run auto insurance and often dwells at length in his speeches on how important it is to keep government out of the insurance business.

Both candidates have said they will enforce Proposition 103, the voter-approved initiative under court challenge because of its requirements to cut premiums and more strictly regulate insurers. Both have also indicated that they would favor legislation to change various parts of the measure. Neither candidate supported Proposition 103 before it passed in 1988.

Bannister collected much of his relatively slim $105,637 in campaign contributions from agent associations and other industry sources, according to the latest reports for the period through September.

On the stump, he often sounds as if he were campaigning to head an agents group. Bannister has repeatedly said that as commissioner he might be inclined to allow insurers higher profits than the 11.2% minimum annual rate of return set by outgoing insurance Commissioner Roxani Gillespie. An increase in insurance company premiums could bring agents millions of dollars in commissions.

Asked if such statements could hurt his standing with voters, Bannister said: “I just don’t know how to campaign any way except honestly. If I start tailoring my statements to what I should say, I’m going to be in real trouble.”

Already he is facing trouble from some who should be his allies. Bannister is cheered in his campaign appearances by his fellow agents, but he often faces hard questioning in places where Republican candidates are usually received uncritically, such as Republican women’s groups.

At a recent appearance before the Arcadia Republican Women Federated, one woman persisted in asking Bannister why her medical insurance premiums were running so high. She went away dissatisfied by Bannister’s response that the insurers are losing money with the high rates.

Garamendi raised $1,661,088 in contributions through the end of September, much of it from political action committees that are among Sacramento’s biggest lobbies, but little or nothing from insurers. He appears somewhat bemused by Bannister’s campaign approach, remarking frequently that he cannot see any way California voters will elect a commissioner who defends the industry.

At the same time, the Democrat has faced charges that he has become, through his opposition to no-fault insurance, the de facto candidate of powerful trial lawyers. Like the insurers, trial lawyers derive much of their income from the insurance system, but they fear that no-fault’s limitations on lawsuits will reduce their income.

Garamendi said he is refusing contributions from the California Trial Lawyers Assn. and trial lawyer PACs. He is taking contributions from individual attorneys and medical lobby PACs, which also have major self-interests in the insurance system.

Conscious that their support is unlikely to sit well with voters, the insurance industry and trial lawyer groups have avoided endorsements in the commissioner’s race. Privately, it is understood that most insurers are backing Bannister and most trial lawyers support Garamendi.

Consumer advocate Ralph Nader, aligned with the trial lawyers against no-fault, nonetheless has been highly critical of Garamendi for failing to take stands on many insurance issues and not being solicitous enough of consumer organizations.

Garamendi is so confident of winning the election that he quit his Senate seat in September. He said the reason was to allow him to campaign full time. His resignation also cleared the way for his wife, Patti, to run for his Walnut Grove seat. That race will be decided in a special election to be held on the same day as the general election.

Besides Garamendi and Bannister, two other candidates for insurance commissioner are on the Nov. 6 ballot and there is one write-in candidate.

Tom Condit, a legal secretary, is the Peace and Freedom candidate. He calls for the state to provide auto and health insurance, ousting private insurers from the field.

Ted Brown, an insurance adjuster, is the Libertarian candidate. He opposes all government regulation of insurance rates and industry conduct as required by Proposition 103.

John L. (Jack) Harden, an insurance investigator who ran unsuccessfully against Bannister in the Republican primary, is mounting a write-in effort, largely on a promise to crack down on insurance fraud.