Debate Stirring Over Idea of Merging Health Plan Oversight Agencies

As California works to reduce state spending and implement the federal health reform law, policymakers and advocates are debating whether to combine the two state agencies that regulate health plans, the Sacramento Business Journal reports.

California is the only state with two agencies that oversee health insurers.

The Department of Managed Health Care oversees health plans -- primarily HMOs -- that cover 21.6 million state residents. The Department of Insurance regulates most PPOs and traditional indemnity plans, which cover about 2.4 million Californians.

Details of Debate

Although no legislation has been drafted to combine the departments, some stakeholders have proposed shifting all health insurance regulation to one agency or the other.

During his campaign for office, Insurance Commissioner Dave Jones (D) called for the two departments to better collaborate and possibly merge.

Ioannis Kazanis, Jones' press secretary, said the dual structure is "confusing to consumers, inefficient and duplicative and can definitely lead to regulatory inconsistency."

Doug Heller -- executive director of advocacy group Consumer Watchdog -- said DOI's history of rate regulation would make it "the reasonable choice" to oversee the entire health insurance market in California.

However, Cindy Ehnes -- who stepped down from her role as DMHC director last week -- expressed concern about the idea of allowing DOI to regulate all insurers. She said DMHC oversees more health plans and has more authority to regulate quality and continuity of care than DOI.

Context of Health Reform

Charles Bacchi -- executive vice president at the California Association of Health Plans -- said efforts to combine DOI and DMHC while the state works to implement the health reform law "is a complicating factor that doesn't make a great deal of sense."

However, Deborah Kelch, president of Kelch Associates, said, "Health reform raises the stakes. It is really about empowering consumers. Having two regulators is cumbersome and confusing."

This summer, Kelch is scheduled to release a report on the issue of merging DOI and DMHC. The California HealthCare Foundation hired Kelch to analyze the issue. CHCF publishes California Healthline (Robertson, Sacramento Business Journal, 3/11).