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Proposition 45 Being Opposed By Insurers

Health insurance companies may suffer a caustic blow by a currently popular ballot initiative that would expand the state’s authority to regulate health insurance rates.

The ballot measure, set for November vote, would give Insurance Commissioner

Dave Jones veto power over rate increases for about 6 million Californians who have individual and small business policies. Jones said the measure would prevent excessive rate hikes that could make the federally mandated health care coverage unaffordable.

Despite reservations from California’s health insurance exchange, Covered California, Proposition 45 has won over nearly seven out of every 10 registered voter respondents surveyed in an independent poll conducted by the Field Research Corp.

Covered California to Oppose

Jones is a democrat who supports the Affordable Care Act and until recently had been on the same side of the fence as the state-run exchange. However, Covered California came out on the opposing side of the measure when officials decided at an exchange board meeting that they would take up a vote in September to formally oppose Proposition 45.

Covered California issued an analysis stating the ballot initiative could have a detrimental impact on the exchange’s operations, including its ability to negotiate with insurance companies. Susan Kennedy, a Covered California board member and former chief of staff to then-Gov. Arnold Schwarzenegger, said Proposition 45 would add delays, confusion, litigation and cost to the process of providing benefits.

Jim Morrison, president and founder of James M. Morrison Insurance Services Inc. and member of the San Diego Association of Health Underwriters is part of the campaign against Proposition 45.

Double Up on Red Tape

“It gives the commissioner the power to regulate everything related to health care — costs, benefits, plans, networks, everything. It doesn’t give a group this power, it’s one person.” Morrison said.

Morrison said the ballot measure would double up on red tape already required by the Affordable Care Act.

“The problem is that Prop 45 was written in 2011, before ACA was in place,” Morrison said. “Covered California is the end result of ACA, and even they are concerned that this is going to be disruptive.”

Morrison said increased regulations would likely slow down the process of acquiring health care coverage with costly repercussions.

“If the cost of business goes up, then the cost goes up for the consumer.” Morrison said.

Anthem Blue Cross, Kaiser Health Foundation Health Plan Inc., WellPoint Inc. and other companies have already invested more than $37 million to defeat the measure according to the Secretary of State’s Office.

Jamie Court, president and chairman of the board of Consumer Watchdog, said there is no question why insurance companies oppose the measure.

“Of course they hate us,” Court said. “Prop 45 is going to save consumers and small businesses from paying high insurance rates. Why wouldn’t they hate us?”

Consumer Watchdog is a nonprofit organization that says it advocates for taxpayer and consumer interests, with a focus on insurance, health care, political reform, privacy and energy. The group consists of public interest lawyers, policy experts, strategists and activists.

“We fight corrupt corporations and crooked politicians on behalf of everyday Americans,” their website states.

Court said Proposition 45 was written in the interest of small businesses and individuals.

Protecting ‘the Little Guys’

“It was designed to protect the little guys,” Court said. “It doesn’t include large businesses who can fend for themselves.”

Morrison argues that Proposition 45 would damage small businesses by decreasing competition among health insurance companies rather than protect them.

“Eventually these insurance companies are going to say, ‘forget California’ and move elsewhere,” Morrison said. “I just don’t see how reduced competition will cut costs. What will be the insurance company’s incentive to lower its rates if there are only two companies that hold 80 percent of the market?”

According to data released by Covered California and the California Department of Health Care Services, four insurance companies — Wellpoint Inc. (including Anthem), Kaiser Permanente, Blue Shield of California Group and Health Net — already hold 95 percent of the market as of February 2014.

“Regulation can lead to greater competition,” Court said. “California has the most competitive auto and home insurance market today. California is the only state in which auto insurance rates fell during the 25 years following regulation.”

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