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Consumer Watchdog (CW), the same group that authored Proposition 103, introduced a ballot measure this past week aimed at regulated health insurance rates. The consumer group actually filed two ballot initiatives -- one that leaves out large-market insurance rates, and one that include the large group market. CW hasn’t decided which to go with.
The ballot measures – titled Insurance Rate Public Justification and Accountability Act – essentially takes AB 52 (Feuer), which would have required health insurance rate review and approval, failed to the voters. AB 52 was stalled in the Legislature this year. Jamie Court, president of CW, says there are a few differences between AB 52 and the initiative.
"This one's stronger," Court said. "It requires that the health insurance industry file requests for rate increases under penalty of perjury. And it gives refund authority, too, if the rate's too high before it's reviewed."
The proposed ballot measure would allow the Department of Insurance (DOI) to act on the rate reviews it already does. In the case of the proposed measure that would regulate some large-group rates, the DOI would take over rate review from the DMHC.
"DOI is better equipped because they do it for every other line of insurance," Court said, such as automobile insurance regulation. "We want to give new prior approval regulatory power to the DOI, to allow the Insurance Commissioner to conduct rate reviews. We're not touching the bifurcated system. This is only about rate regulation it doesn't touch anything but rate regulation."
The perjury aspect is particularly appealing to Court, he said. "If a health insurer is going to submit something under penalty of perjury, you can bet it's going to be accurate," Court said. "A lot of this is deterrent, really. The key thing here is the power, not the paperwork."
Another aspect of the proposed initiative is requiring health insurance companies to pay a fee to cover the costs of administering these new laws so that this initiative will cost taxpayers nothing. When AB 52 was analyzed by the Appropriations Committee, costs to the DMHC were estimated to be at least $30 million for rate review and approval.
The ballot measures could also impact the auto insurance industry by challenging another proposed initiative on auto insurance discounts for persistency. The 2012 Auto Insurance Discount Act, sponsored by the American Agents Alliance, would allow consumers to receive a discount for their years of continuous automobile coverage regardless of the company where they seek insurance.” It is similar to Proposition 17, which was narrowly defeated in 2010.
The CW initiative proposes to accomplish these ends by prohibiting unfair pricing for health, auto and home insurance based on prior coverage and credit history.
Essentially, in introducing the health insurance proposal, CW is taking advantage of anticipated support as sort of a preemptive strike against the persistency initiative. Having two initiatives addressing the same issue on a California ballot effectively kills the weaker of the two. If both initiatives show up on ballots, the ones with the most votes win.
Court acknowledged that part of the plan is to continue to prevent insurance companies from basing rates on prior insurance history. However, Court said, if supporters of the persistency initiative can reward customers by offering discounts “without charging people more because they didn’t have insurance before, then we don’t have a problem between our initiatives.”
At the heart of argument is whether offering discounts to drivers based on their past with another company amounts to penalizing those drivers who do not get better rates. However, this initiative also takes a stab at preventing companies from using credit history as well.
Once the initiative's language is approved by state officials (expected in January), CW has until May 1 to collect 504,760 signatures to get health insurance regulation on the November ballot.