Prop 45 Would Give Insurance Commissioner Final Say on Health Premiums

When the Affordable Care Act set up a state-run health insurance marketplace, it created a framework through which more than a million people signed up for health care within months. But it also created a new state agency that insurance companies must answer to. 

“We have changed the trend in health care costs. For consumers, we’re making a huge impact,” said Peter Lee, Executive Director of Covered California, while announcing the exchange’s 2015 rates this past July.

Lee pointed out the exchange isn’t just a clearinghouse for industry as it is in other states – it actively negotiates with insurers to get the best deal.

“We have had multiple in person meetings, but huge amounts of back and forth electronically, information, questions, follow ups, of actuary to actuary discussions,” says Lee.  

Lee says Covered California’s power to choose which plans are offered in the subsidized marketplace is part of why premium increases will be modest next year.  

“We sent them back, and time and time again [insurers] came back with much lower rates,” he said.

But Covered California does not have the final voice on health plan prices. Health insurance regulators review rates, and they may even find them unreasonable. But there is no law to force insurance companies to comply with a regulators recommendations. Proposition 45 would change that by giving California’s insurance commissioner the power to reject a rate increase that he or she finds excessive. Covered California says that could interfere with its marketplace.

Prop 45 Would Affect Consumers Outside Covered California

Not everyone in individual insurance policies have coverage through California's exchange.

“Just because we have Covered California acting as a purchasing agent, it doesn’t mean that every single person has an affordable health plan currently, ” says Dylan Roby, Assistant Professor with the UCLA Fielding School of Public Health.

Roby says about a million people are in coverage that don’t benefit from Covered California’s active negotiations, and would get premium protection through Prop45’s rate approval process. Roby says at least 34 other states have such laws, and in many cases, consumers have paid less because of them.

“In the majority of cases it’s true that those insurance commissioners that do have the power over rate regulation, are able to keep premium increases lower than in states that don’t have that power,” he says. 

Prop 45 Would Require Three Agencies to Work Together

As if the new health insurance system weren’t complicated enough – in California, there are two state health insurance regulators. The Department of Managed Health Care and the Department of Insurance. Proposition 45 would give the Insurance Commissioner the final say on the rates for plans the Department of Managed Health Care oversees.

“Department of Managed Health Care, actually has a lot of power and a lot more authority over network adequacy issues, timeliness, tracking and auditing, the access issues that patients may face,” says Roby. 

Roby says the weakness of Prop 45 is that it could duplicate government bureaucracy.  

“You would like to see insurance rate regulation exist in whatever regulatory body is already regulating the plan,” he says.

Health consumer advocates say they’ve supported a state health insurance approval law for some time. They say the success of this law would require that three government agencies to work together, and in a timely manner.