One side says health insurers are gouging California consumers and need to be regulated.
The other side says adding more government oversight in the early stages of health care reform will muddy the waters and could damage the new system before it has a chance to work.
The battle over a ballot initiative to give the state insurance commissioner authority to reject health insurance rate increases picked up steam last week. On Tuesday, proponents staged a rally denouncing huge cash reserves held by health insurance giant Kaiser Permanente. They asked why the insurer kept raising premiums when the not-for-profit company has $21.7 billion in reserve — more than 1,600 times the amount required by state regulations.
Two days later, opponents released a study saying regulating insurance prices could disrupt the health care overhaul by destabilizing negotiations between the new exchange and insurance companies and inviting costly legal challenges from outside organizations.
Players on both sides accuse each other of making misleading statements and telling half-truths.
So far, the skirmishing has been noticed mostly by the players themselves, but the messages will go public in a big way next month after the secretary of state issues proposition numbers for initiatives on the November ballot. Voters will be deluged with television, radio, print and online advice, as they decide whether California should join 35 other states that have given state regulators the authority to deny insurance rate hikes state officials deem unjustified or unreasonable.
Report Discounted, Defended
Opponents have collected more than $25 million — almost all of it from health insurance companies — to defeat the initiative. Californians Against Higher Health Care Costs, the ironically named organization formed to oppose the measure, spent a small portion of the war chest — $50,000 — on a report from Wakely Consulting Group.
The report — written by Jon Kingsdale, former executive director of Massachusetts’ health insurance exchange and a former insurance industry executive — warns that rate regulation could harm Covered California. Kingsdale says delays and conflicts over prices negotiated by the state’s new health insurance exchange could jeopardize the progress of health reform in the state.
Proponents of the initiative, including California Insurance Commissioner Dave Jones and Jamie Court — president of Consumer Watchdog, the organization sponsoring the measure — discounted the report.
“This is straight out of the insurance industry playbook,” Court said. “Havoc and chaos is what the industry predicts. They peddle fear and use scare tactics paid for by the industry and written by industry insiders.”
Kingsdale defended his report, saying his analysis should stand on its own, regardless of who wrote or paid for it.
“It’s a pretty weak argument to attack a set of propositions by criticizing who wrote it,” Kingsdale said. “I haven’t worked for an insurance plan for over eight years and even if that were my background yesterday, it’s no more relevant than Harvey Rosenfield getting paid as an intervenor. And I think they get paid hourly rates higher than mine,” Kingsdale said.
Rosenfield, founder of Consumer Watchdog and author of a landmark proposition that reformed and regulated auto and property insurance in California, serves as an intervenor for consumers in dealings with the California Department of Insurance.
Proposition 103, passed by California voters in November 1988, authorized consumer participation in the administrative process for setting insurance rates, which allows “intervenors” to recover advocacy and witness fees and expenses.
The health insurance measure on this year’s ballot applies many of the same regulations and restrictions to health insurers that Prop. 103 applied to auto insurers 26 years ago.
According to Consumer Watchdog, its previous challenges of rates for several kinds of insurance — including auto, home, medical malpractice and earthquake — have saved consumers more than $3 billion over the past dozen years.
Next Play in Playbook
“The next tactic we expect to see from the playbook is to get all the Legislature’s enemies of rate regulation to complain and wring their hands about how bad it would be to give consumers some leverage,” Court said.
“You’ve already seen that from Ed Hernandez (D-West Covina), but they’re going to have to look a little harder for opponents than they used to. Three of the insurance industry’s best friends in the Legislature — Rod Wright (D-Inglewood), Leland Yee (D-San Francisco) and Ron Calderon (D-Montebello) — aren’t there anymore,” Court said.
All three state senators have been suspended pending outcomes of criminal cases against them. Wright was convicted of lying about where he lived when running for office. Yee and Calderon were indicted in separate federal corruption investigations.
Hernandez, chair of the Senate health committee issued a prepared statement in response to Kingsdale’s report, saying, in part:
“We in the Legislature made a conscious decision to establish Covered California as an active purchaser, and I’m uneasy about the potential of this initiative to undermine their authority and bargaining power. This report, performed by a very credible expert on health policy, raises serious concerns that this ballot measure could place the successes we’ve had at risk and harm the low-income Californians we are trying to help.”
Kaiser Vilified, Defended
Last week’s Oakland rally highlighting Kaiser’s reserves was staged by the California Nurses Association, a labor union whose contract with Kaiser expires this summer. It was a dual-purpose event, supporting the ballot initiative as well as giving union nurses a soapbox.
Nurses said patient care declines and premiums for coverage increase while Kaiser gets rich.
Barbara Crawford, Kaiser vice president for quality and regulatory services, said nurses’ claims were unfounded.
“This is just another chapter in the union’s irresponsible campaign to mislead the public by making false and inflammatory claims about the quality and safety of Kaiser Permanente care, and about ‘excessive profits.’ It is disappointing that the union uses these tactics to apply pressure as part of their contract bargaining strategy and to attempt to push a national political agenda,” Crawford said.
Kaiser officials also disputed the nurses’ allegation of a huge reserve.
“The California Nurses Association’s claim that Kaiser Permanente has ‘excess reserves’ is inaccurate,” said Kaiser spokesperson John Nelson.
“The $21.7 billion figure that CNA described this week as ‘excess reserves’ is actually a component of Kaiser Permanente’s net worth, not financial reserves. Our net worth, including the $21.7 billion figure, represents the value of our 38 hospitals, over 600 medical office buildings, information technology systems, etc. — all the things we have built or purchased to provide care and services to our members. Put more simply, our total assets, minus our plant, buildings and equipment, are about equal to our liabilities,” Nelson said.
Kaiser’s first-quarter profits announced this week were up 44% from last year. The company reported $822 million in operating surplus on $13.9 billion in revenue.
More Room on November Ballot
California’s November ballot got a little less crowded last week when two proposed health care initiatives were removed.
Service Employees International Union agreed last week to remove two statewide measures from the ballot as part of a settlement agreement with the California Hospital Association.
Last fall, SEIU-United Healthcare West, the largest health care labor union in the state, threatened to take its battle with CHA to voters by starting the process to qualify two initiatives for the statewide ballot. The Fair Healthcare Pricing Act would have prevented hospitals from charging more than 25% above the actual cost of care and the Charitable Hospital Executive Compensation Act would have limited executive salaries at not-for-profit hospitals to the same level as the U.S. president’s annual salary — $450,000.
The union, which predicted the two measures could save the state $2.5 billion annually, last week agreed to withdraw the initiatives and join CHA in funding a $100 million campaign to increase California’s reimbursements for Medi-Cal, the state’s Medicaid program. The settlement also includes a new “code of conduct” between the two organizations meant to improve hospital work environments.
Although not announced as part of the agreement, the settlement also means California voters won’t have a chance to weigh in on hospital executive salaries or fair pricing of hospital services.KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
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