In a presentation by Executive Director Peter Lee to the Board of Covered California on the potential effects of the health insurance rate regulation proposal to go before California voters in November, known as Prop. 45, it was clear the passage of the California Department of Insurance supported proposition could present significant challenges to the operation of California’s health insurance exchange. The presentation and following discussion was held under the shadow that a recent survey of Californians expressed support for the rate regulating Prop 45.
Health insurance rate regulation like car insurance
The voter initiative formally known as the Insurance Rate Public Justification and Accountability Act, Prop. 45 would give the Insurance Commission the power to approve or reject health insurance premium increases in California. The official summary states –
Requires Insurance Commissioner’s approval before health insurer can change its rates or anything else affecting the charges associated with health insurance. Provides for public notice, disclosure, and hearing, and subsequent judicial review. Exempts employer large group health plans.
Essentially, health insurance rates would be submitted to the California Department of Insurance for approval much like car insurance rates are submitted, negotiated and approved under Prop. 103 approved by voters in 1988.
Covered California leans against rate regulation proposal
After numerous informational meetings, testimony, public comments and written correspondence with California Insurance Commission Dave Jones, Covered California presented five elements of concern that Prop 45 would present to their operations. View the full power point presentation pages 26 to 34 of the Executive Directors Report to the Covered California Board.
- Covered California’s role as an active purchaser of health plans would be undermined. Currently, Covered California negotiates with the different carriers on benefits and premiums of the health plans to be offered. Prop. 45 would put premium rate approval in the hands of the Insurance Commissioner. In addition, Covered California fears the Department of Insurance might regulate other aspects of the health plans like provider networks adversely impacting consumers.
- The process of having Covered California, Department of Insurance and the Department of Managed Health Care review and comment on the rate proposal in addition to any appeals by the carriers might present a situation where health plans couldn’t get approval in time to be implemented in the next year.
- There is the risk, as seen by Covered California, that some carriers may just withdraw health plans either during the rate review process or after their rates were deemed excessive.
- Under the “plain language” of Prop. 45, the Department of Insurance (CDI) can review rates back to 2012. If the CDI determine the rates were excessive they could order the health insurance companies to pay rebates to members during that time period.
- Because the formula of determining the Advance Premium Tax Credit (APTC) is based on the second lowest Silver plan in the region, retroactively changing rates or regulating future rates ordered by the Department of Insurance could be disruptive for consumers who might realize less tax credits being applied to their health insurance premiums.
Will Prop. 45 confuse the ACA process?
Board member Susan Kennedy made spirited comments against Prop 45 at the August Board meeting. She sees the rate regulating initiative as creating too much confusion and uncertainty as Covered California is proceeding with a historic transformation of the health insurance market place in California. Public comments were equally opposed to Prop. 45. This almost seemed out of character as most public comments tend to request more regulation and intervention on the part of Covered California in the health insurance market. The lone proponent for Prop. 45 was a representative from the Department of Insurance who probably wished she had brought some co-workers along for back up.
Multiple rate reviewing bureaucracies in California
With the incarnation of Covered California as the state’s Affordable Care Act’s health insurance exchange, California now has three separate bureaucracies reviewing health insurance rates. The other two are the Department of Managed Health Care (DMHC) and the Department of Insurance (CDI). DMHC reviews all Health Maintenance Plans (HMO) including the Preferred Provider Organizations (PPO) and the new Exclusive Provider Organizations (EPO) from Anthem Blue Cross and Blue Shield California. The only plans CDI reviews that are sold through Covered California are the Health Net EPO health plan rates and the PPO small group health plans offered in SHOP.
Department of Insurance supports Prop. 45
It looks as if Covered California and the Department of Insurance will be opponents in the battle over passage of Prop. 45. The back drop to this political fight between two bureaucracies is a series of professional, yet terse, letters between Insurance Commissioner and Peter Lee. The first letter dated July 17th is a response from Insurance Commissioner Jones about questions Covered California asked in public about how CDI would implement Prop. 45. All letters can be downloaded at end of post.
Dear Mr. Lee:
At Covered California’s June 19, 2014 Board meeting, you staff detailed a list of questions they had detailed a list of questions they had developed about the Insurance Rate Public Justification and Accountability Act (known as Proposition 45). At the July 2, 2014 joint hearing of the Senate and Assembly Health Committees the Department of Insurance provided written answers to each of those questions to Covered California and the Committees. Attached is another copy of the detailed written answers to your questions. – Insurance Commission Jones, July 17th letter to Peter Lee
The letter from the commissioner goes on to discuss how California has tried to pass rate regulation in the past and well the CDI has implemented Prop. 103. The CDI answers addressed many of the concerns laid out in Peter Lee’s presentation about the fears of Prop. 45 causing massive disruption to Covered California’s operation.
Questions, questions, questions
In his reply letter dated July 30th, Peter Lee followed up by asking another 14 questions about how the Department of Insurance rate review and regulations might impact Covered California. Specifically, Covered California is worried about the time line for the rate reviews so that plans are not delayed for open enrollment.
We appreciate your expertise and how you believe an Insurance Commissioner could implement the intervenor requirements in regulations. Our preliminary review of the California Administrative Procedure Act (APA), however, makes it unclear how required due process can be achieved in approximately 60 days. Because this issue is important for our analysis of the initiative and its impacts on our operational timelines, we would like to reiterate our request that you share with us your proposed timeline for an administrative review process under Proposition 45 than can in all cases reach a resolution in close to 60 days from the date of the filing. – Executive Director Peter Lee, July 30th letter to Commissioner Jones .
Is Insurance Commission Dave Jones frustrated with Covered California?
Insurance Commissioner Jones replied to Peter Lee’s additional questions on August 17th in a letter with a tone that could only be described as a parent frustrated by their child’s incessant questions about what summer camp might be like.
The Department of Insurance prepared detailed written responses to each and every question raised about the Insurance Rate Public Justification and Accountability Act (Proposition 45) from Covered California’s June 19th, 2014 Board meeting. We also met with you and your staff to answer each and every question and your follow up-questions. This letter is in response to your July 30th, 2014 letter in which you posed additional follow-up questions. – Insurance Commission Jones, August 19th letter to Peter Lee
Commission Jones answers the follow-up questions based on the department’s experience and procedures for handling rate regulation of automobile insurance. The Commissioner concludes in his final paragraph with a defense of the Department of Insurance as if his support of Prop 45 is his attempt to undermine the Affordable Care Act.
I and my Department fully support the Affordable Care Act and Covered California. We have spent considerable time, energy and resources to implement successfully the Affordable Care Act in California. The Department has reviewed Proposition 45 and concluded that it is not inconsistent with the Affordable Care Act or Covered California… Over 35 states have enacted health insurance rate regulation along with the implementation of a state exchange or the federal exchange under the Affordable Care Act. – Insurance Commissioner Jones, August 17th letter to Peter Lee
Covered California is not convinced
Obviously, the attempts of Insurance Commissioner Jones to answer all of Covered California’s questions over Prop. 45 were not persuasive enough because the focus of Peter Lee’s questions to the Commissioner would be the foundation for the five points of concern presented to the Covered California Board meeting on August 21st. The Insurance Commissioner and Peter Lee have never had a particularly cozy public relationship. Each views the other and encroaching on their turf. Now it looks as if one of the Board members, Susan Kennedy, might openly support a campaign to defeat the Commissioners pet proposition.
As usual, the interest of the consumers seems to get forgotten as political egos prepare for battle. California has a fractured process for approving health insurance premiums with three different bureaucracies tasked with some portion of the review: Department of Insurance, Department of Managed Health Care, and Covered California. This is the true failure of our current government structure. Until all the rate regulation duties are put under one roof, California will continue to have bureaucracies battling each other over who will have the ultimate authority over rate regulation.
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