Consumer Watchdog’s proposed rate regulation Initiative Is NOT AB 52
Consumer Watchdog has proposed a ballot initiative for the November 2012 statewide ballot that will impose rate regulation on some health insurance plans in California. A similar concept, AB 52, was considered in the California Legislature in 2011 and failed to garner passage. There are some key differences between the new initiative and AB 52. Organizations and editorial boards that supported AB 52 last year should carefully consider the proposed initiative, given the key differences between the two proposals.
Different from AB 52, the proposed initiative:
- Places rate regulation in the control of one elected politician – the Insurance Commissioner.
- Confuses regulatory oversight with the Insurance Commissioner seizing power for rate regulation over a market sector historically overseen by the Governors’ Department of Managed Health Care.
- Provides the Insurance Commissioner the power to regulate rates, co-pays, deductibles, and benefits.
- Only targets individual and small group markets; excludes large group plans.
- Inserts poison pill to repeal a completely unrelated auto insurance initiative.
|Area||CW Initiative||AB 52|
|Regulatory Authority||Alters California’s existing division of regulatory oversight for health insurance, splitting off some health plan oversight to the CA Insurance Commissioner and creating confusion.California’s elected Insurance Commissioner would regulate rates for all health care coverage – PPO and HMO – even though the elected politician has no other regulatory authority over HMOs.
The Dept of Managed Health Care (DMHC), part of the Governor’s Administration, is the HMO regulator and responsible for licensing, health plan fiscal solvency, consumer/provider complaints, health plan audits, guidance and implementation of CA law.
Under this initiative, the Insurance Commissioner would control rates without consideration of solvency or other pertinent regulatory issues that rest with DMHC.
|Follows California’s existing division of regulatory oversight for health insurance. Currently, the CA Department of Insurance regulates PPOs. And, the DMHC regulates HMOs.Rate regulation would follow existing regulatory structure with the CA Department of Insurance regulating PPO rates and DMHC regulating HMO rates.|
|Which Sectors Would Be Subject to Rate Regulation||Rates for health insurance for small group plans/businesses (~50 employees or less) and individuals health coverage only would be regulated.Rates for large employers’ health coverage are explicitly excluded from rate regulation under the measure.||All health coverage offered by California licensed health plans and insurers would be subject to rate regulation.|
|Scope||An elected politician would regulate rates andbenefits.Not only would the Insurance Commissioner have the power to dictate insurance premiums, but this elected politician would also decide what benefits should be included in coverage.
Small employers could easily lose control of choosing policies to offer to employees. It may be easier and cheaper for these entrepreneurs to forgo employee coverage all together.
|Regulates rates only.|
|Impact on California’s New Health Benefit Exchange – Key Component of Health Care Reform||Allows an elected politician to interfere with California’s new Health Benefit Exchange by delaying the release of new health coverage policies and changing the pricing established by the Exchange Board and Leadership.Along with the Insurance Commissioner usurping the Governor’s regulatory authority (see “Regulatory Authority”), it would further complicate a new program that needs flexibility to meet the goal of offering millions of Californians a new marketplace for health insurance.||Allows an elected politician to interfere with California’s new Health Benefit Exchange by delaying the release of new health coverage policies and changing the pricing established by the Exchange Board and Leadership.|
|Uses Initiative As Vehicle To Impact Other Types of Insurance||Includes convoluted language aimed to negate a Nov. 2012 auto insurance ballot initiative, which has nothing to do with health insurance.||Solely focused on health coverage.|
|Inclusion of Policy For PR Purposes||Includes language prohibiting health plans from using credit scores when considering applicants.Irrelevant from a policy perspective since health plans/insurers do not consider applicants’ credit scores.||Did not include any language regarding credit scores.|
|Government Duplication||Existing laws require the DMHC and CDI to review rates before going into effect.Regulators will perform redundant reviews of rates. The Insurance Commissioner and DMHC will review rates according to their health insurance licensing jurisdiction, then the Insurance Commissioner will review DMHC rates again. Health plans would have to go through the delay and expense of conducting two separate rate review processes (CDI and DMHC) and a prior approval rate regulation process (CDI).||Maintains existing rate review authority of DMHC and CDI and adds a rate regulation process resulting in health plans having to submit a rate review filing and a separate rate approval filing.|
|Insurance Cost Factors||Requires that Prop 103 provisions regarding losses, trend, rate of return, trends, and catastrophic losses for auto and homeowners insurance be applied to health care coverage ignoring the differences between health care service plans and traditional indemnity insurance lines.In setting rates, does not take into account contracted rates with providers nor does it contain any confidentiality protections.||Requires that rate approval take into account medical trend, including payments to hospitals and doctors, as well as non-medical overhead, which is regulated and limited under federal law. Requires filing of contracted rates between health plans and providers and deems these rates to be confidential and not disclosed to public.|