If you believe the advertising on television, health insurance in California is now the best deal since sliced bread.
Four health insurance companies, which control 84% of the California market, are spending tens of millions of dollars to convince voters they have it so good that the state doesn't need Proposition 45. The November ballot measure would simply give the insurance commissioner the right to reject excessive health insurance rates.
Covered California, the government health insurance pool — which insurance industry advertising against Proposition 45 refers to as "the independent commission" — is spending tens of millions of taxpayer dollars too. Its advertising showcases satisfied policyholders touting their affordable health insurance ahead of November's open enrollment period and the election.
The reality for many people forced to buy insurance under the government mandate is radically different: high premiums and too few doctors in their networks.
In a Field Poll released in August, Californians expressed strong support for the Affordable Care Act but complained of the high cost of health insurance premiums. Recently, The Times reported that Covered California "still has no comprehensive directory to help consumers match doctors with health plans," which was a problem in last year's flawed rollout.
The parallel industry and government advertisements against Proposition 45, which often run back to back on television, demonstrate the close collaboration between Covered California and the four health insurance companies. The government ads testify to affordable insurance and the industry ads erroneously claim Proposition 45 will take it away.
Covered California touts the insurance companies as its "plan partners." Many consultants hired to create the pool and its key staff have been employees at the health insurance companies. That includes key staff members who help the Covered California board negotiate contracts with the companies behind closed doors.
Collaboration may be good in marketing a product, but it's not what consumers need to ensure that they don't get ripped off by insurance companies that can set any price on their policies.
Thirty-five other states require health insurance companies to get approval before raising rates, but not California. Proposition 45 gives the elected insurance commissioner the power to reject excessive rates. And that's what Covered California and the insurance industry seem to fear.
Their bureaucratic concerns boil down to the argument that there is not enough time for an elected official — the insurance commissioner — to provide a public check-and-balance process on their private negotiations. This has not been a problem in Oregon, New York and Connecticut, where rates were dramatically cut by rate regulators for exchange members.
What's the cost when consumers go unrepresented? Based on data from the California Department of Insurance and the California Department of Managed Healthcare from April 1, 2012, though Nov. 1, 2013, nearly 700,000 small-businesses employees faced $250 million in health insurance rate hikes that California regulators deemed "unreasonable" but had no power to stop. This is what Proposition 45 remedies.
We all have to buy health insurance under the law, but no government agency has the power to guarantee insurance is affordable.
Those who believe Covered California can use the carrot of negotiation to keep rates low don't understand how insurance companies work when they have huge market power and no one with the stick to stop them.
There's a big difference between a government purchasing pool, which serves more like a broker for its big insurance company vendors, and an independent regulator charged with keeping rates low.
Over the years, California's elected insurance commissioners — who are accountable directly to the voters who created the office in 1988 — have kept auto, home and business insurance rates affordable because they had the power to reject excessive rates in those industries. Commissioners — Republican and Democrat alike — have kept auto insurance rates, for example, lower in real dollars than they were 25 years ago, the only state with that record. And despite claims in insurance industry advertising against Proposition 45, no insurance commissioner has taken insurance industry contributions since 2002.
By contrast, Covered California is governed by political appointees; three of the five were hostile to rate regulation when serving the last three governors. The reason Proposition 45 gained enough support to be on the ballot is because the insurance industry has stopped legislation in Sacramento for rate regulation for the last decade.
If passed, Proposition 45 would require health insurance company chief executives to file public applications to raise rates under penalty of perjury, allow for public hearings and let consumers challenge unreasonable rates. This same public process of consumer group challenges to the auto insurance industry has saved California drivers an estimated $3 billion in rate hikes since 2002, state records show.
Consumers Union questioned some 2015 rates hikes as unjustified based on the insurance companies' record-high surpluses, unrealistic claims projections and excessive company perks. The companies were allowed to raise their rates anyway without adequately responding to those concerns. Under Proposition 45, the insurance commissioner could reject those hikes if he found them to be excessive.
These rates affect not only the 1.2 million insured through Covered California, 80% of whom get federal subsidies, but also the 4.8 million individuals and small businesses that must pay full price for policies that are anything but affordable.
These Californians deserve Proposition 45's guarantee that an elected official be able to publicly review and say no to excessive rates.
Jamie Court is president of Consumer Watchdog and author of Proposition 45.