Report: DOI Regulation of Health Plan Rates Could Hurt Exchange

A proposed ballot measure that would give the state government regulatory authority over health insurance premium rates could cause setbacks and legal challenges to provisions of the Affordable Care Act, according to a report released Thursday by Californians Against Higher Healthcare Costs, the Los Angeles Times reports. However, state officials disagree with the findings.

The report was funded by provider and health plan groups that oppose the measure (Terhune, Los Angeles Times, 5/8).

Background

The initiative -- which is being promoted by Insurance Commissioner Dave Jones and Consumer Watchdog -- would give the state regulatory authority to monitor and control health care premium rates, similarly to how it controls automobile and property rates (Cadelago, "Capitol Alert," Sacramento Bee, 5/8).

So far, a coalition of health insurers has contributed $25.4 million to a campaign against the measure.

Details of Report

The report was produced by Jon Kingsdale, with the Wakely Consulting Group.

For the report, Kingsdale reviewed filings for property and casualty insurance rates in the state from between 2005 and 2011. Of those, he found that a third party had intervened in 86 of the filings, causing a delay of nearly a year on average.

According to Kingsdale, those findings indicate that similar delays could take place if the state Department of Insurance is given authority over health insurance rates. Such delays could cause conflicts with Affordable Care Act deadlines and could make it more difficult for Covered California to negotiate rates with insurers, he added.

Kingsdale said, "Opponents of the Affordable Care Act could routinely intervene to bring the whole annual open enrollment to a grinding halt."

Jones' Response

In response to the findings, Jones said, "This consultant's report has been bought by health insurers who are dead set against any public scrutiny that could rein in excessive rate increases."

Jones noted that four health insurers control 94% of the state's exchange market, adding, "Because of that concentration in the market, the exchange doesn't have enough buying power to drive rates down."

Jones also disagreed with the report's findings about delays caused by third-party interventions, noting that such challenges are not common and that DOI is capable of meeting Covered California deadlines.

Other Reactions

Consumer Watchdog founder Harvey Rosenfield said concerns about ACA opponents using rate regulation to interfere with exchange enrollment was unfounded.

However, Larry Levitt, a senior vice president at the Kaiser Family Foundation, said the findings raise legitimate concerns. Levitt noted, "There is the potential for chaos if interests collide," adding, "Some really difficult operational issues would need to be worked out" if the ballot measure succeeds.

Meanwhile, Covered California Director Peter Lee said the exchange would not take a position on the ballot proposal because it has not yet determined the potential implications. However, he said, "If this process means some plans are not on the shelf for open enrollment that would not be of benefit to the consumer."

The exchange in June plans to finish its own review of the initiative, according to Lee (Los Angeles Times, 5/8).