Experts: Merging Regulators a Good Idea, but When?

Putting health insurance regulation under one bureaucratic roof in California makes sense to many experts, but when and how to do it are not so universally agreed upon.

“In an ideal world, it would be a good thing to do, but realistically there are some political obstacles that might not make this the best time to pursue that idea,” according to Daniel Zingale, founding director of one of the two bureaucracies overseeing health insurers in California.

Zingale — now senior vice president for policy, communication and public affairs at the California Endowment — was the first director of the Department of Managed Health Care when it was formed 11 years ago. The state agency was conceived as the engine driving a sweeping package of reforms in reaction to angry Californians complaining about how they were treated by HMOs.

DMHC shares watch over health insurers with the California Department of Insurance, which also has responsibility for regulating other kinds of insurance, including auto, homeowners, life and fire. The governor has jurisdiction over DMHC and another elected official, the insurance commissioner, has jurisdiction over DOI. That division of power is one reason Zingale sees consolidation as unlikely — or at least not easy.

“The political reality of having a new governor and a new insurance commissioner makes consolidation right now pretty unrealistic,” Zingale said.

Reform Brings Consolidation Debate Back to Forefront

Although no legislation or formal proposal to combine the departments is in the works, various stakeholders have proposed shifting all health insurance regulation to one agency or the other. Last year, during his campaign for office, Insurance Commissioner Dave Jones (D) called for the two departments to better collaborate and possibly merge.

Doug Heller, executive director of Consumer Watchdog, believes DOI’s history of rate regulation in other forms of insurance would make it “the reasonable choice” to oversee the entire health insurance market in California.

Cindy Ehnes, former DMHC director, points out that DMHC oversees more health plans and has more authority to regulate quality and continuity of care than DOI.

DMHC has purview over many more covered lives than DOI. DMHC oversees health plans — most of them HMOs — covering 21.6 million state residents. DOI regulates most PPOs and traditional indemnity plans covering about 2.4 million Californians.

The consolidation debate was brought to the forefront by the release of a new California HealthCare Foundation report examining how the state might best handle health insurance regulation under the Affordable Care Act.

CHCF publishes California Healthline.

‘Single Point of Entry’

Although he considers consolidation unlikely before the full effects of federal health care reform arrive in 2014, Zingale said the state should take steps now to create a sort of virtual consolidation for consumers’ sake.

“I think from a consumer perspective, it should be as if they are interacting with one state government,” Zingale said. “I think it’s a good and realistic goal of the Affordable Care Act for the consumer to no longer experience the silos of state health regulation.”

“There needs to be a single point of entry for consumers,” Zingale said. “As it is now, people get bounced all around from one agency to another. I don’t think it’s an unreasonable demand that consumers should have one place they go to find out about health insurance.”

Zingale said that while political obstacles might prevent consolidation, there’s nothing to prevent streamlining and simplifying things for consumers.

“If the state government decides it’s going to happen, it can happen,” Zingale said.

Commonwealth Panelists Agree

All three panelists in a Commonwealth Club forum in San Francisco last week titled “Health Care Reform Comes to California: Are We Ready?” agreed that it makes sense to have California insurance regulation under one roof.

“I think in general it’s a good idea to have a single regulator with a single set of standards that apply to all insurers,” said Janet Coffman, analyst at Philip R. Lee Institute for Health Policy Studies and adjunct professor in the Department of Family and Community Medicine at UC-San Francisco.

“What you see under the divided regulatory structure in California is that most people in large, employer-provided plans are under the DMHC, but the majority of those in the individual market are under the Department of Insurance, which in many ways has looser regulatory coverage. In general, I think the Department of Managed Health Care has stronger consumer controls.”

When the plan to create DMHC first came up more than a decade ago, Steve McDermott, CEO of Hill Physicians Medical Group, predicted problems.

“In my first meeting with Daniel Zingale shortly after he took over the newly created DMHC some 10 years ago, I told him the bifurcation of insurance oversight would become a serious problem,” McDermott said.

“Since then health insurance plans have — not surprisingly — migrated away from the highly regulated DMHC over to DOI,” a migration McDermott said made sense for the health plans but not for the state.

“One agency would be a more effective and efficient regulator,” McDermott said.

Ralph Silber, executive director of the Alameda Health Consortium, said he hopes whoever has the job of regulating health insurers gets some clout to go with the job.

“Regulators should have more authority over premium costs no matter where or who those regulators are,” Silber said.

A bill in the Legislature now, AB 52 by Assembly member Mike Feuer (D-Los Angeles), would give the state — either the insurance commissioner or the Department of Managed Health Care — authority to reject health insurance premium rate increases if they are deemed excessive.

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