Insurance Commissioner Defends Health Insurance Initiative

In this lull between the end of the first open enrollment for Covered California and the release of rates for next year — expected to be made public in July — San Francisco's Commonwealth Club invited the state's Commissioner of Insurance Dave Jones to talk about the state of the health care overhaul in California.

The commissioner closed his remarks by pitching for the rate review ballot initiative coming up in November. As moderator of the discussion following, I fielded several questions from the audience about the upcoming initiative. To recap the basics: If passed, the initiative would give the insurance commissioner the authority to reject excessive health insurance rate increases.

The insurance commissioner already has that authority over auto, homeowner, property and casualty insurance — via voter-passed Proposition 103 back in 1988. Many voters are surprised, Jones said, to find out he cannot also reject health insurance premium increases.  He called this lack of explicit authority a "major missing piece of the Affordable Care Act."

"Californians have suffered from repeated health insurance rate hikes year after year," Jones said. "On average (health insurance) rates in the last 10 years have gone up over 150 percent. That's five times the rate of inflation."

Jones also noted that 35 states have given their insurance commissioners "the authority to reject health insurance rate hikes, but not California."

It's a measure that likely sounds appealing to plenty of voters, but a report earlier this month determined that, if passed, the initiative could destabilize Covered California, the state's Obamacare exchange. The report was written by consultant Jon Kingsdale, the former head of the Massachusetts health exchange who has also been an advisor to the Obama administration on the Affordable Care Act. It was funded by Californians Against Higher Health Care Costs, which includes the California Association of Health Plans.

Under state law, Covered California can negotiate with insurers and can reject plans from participating in the exchange. This leverage may have helped to moderate rates in the exchange's first year. Still, Covered California must submit accepted plans to the state's regulators for certification.

And here's where we get into the weeds of certifying insurance rates and what this initiative would do.

Under Prop. 103, consumer "intervenors" can file challenges to rate hikes. They can recover "reasonable costs and fees" under certain circumstances for mounting a challenge. Intervenors do this now, on occasion, with the other types of insurance covered by Prop. 103.

But under the ACA, the individual market for health insurance is now sold only during an open enrollment period — just several weeks out of the year, not year-round like auto or homeowners insurance is.

Larry Levitt, senior vice president at the Kaiser Family Foundation, called the intervenor process "a real wild card" if approved for health insurance rates. "There is the potential for some real messiness here if rates are challenged and not finalized before open enrollment begins."

That messiness would extend beyond just the premium. Under the ACA, subsidies are set according to the cost of the second lowest-cost premium. "Worst case," Levitt said, "you enter open enrollment without final rates, for at least some plans, so you don't know what the second lowest-cost silver plan is, so you're not certain of the benchmark for the premium subsidies." In other words, you could have people picking plans at rates that might change down the line.

Jones insisted that worry was overblown, pointing out that his department has about 7,000 rate filings annually for property and casualty insurance. Only about 12 of those filings are challenged by intervenors, "so .2 percent of all the rate filings have an intervenor," Jones said.

His department gets about 100 health insurance filings a year. "I'm confident that we can review those and accommodate public input … to meet the timelines of the exchange," he said.

Covered California is expected to release its analysis of the initiatives impact in the next several weeks.

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