Californians – “Insurance on My Mind”

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California voters had insurance on their minds during the mid-term elections with at least two insurance-related questions on the ballot.

The first was Proposition 45, entitled the “Healthcare Insurance. Rate Changes. Initiative Statute.”  If approved, this initiative would have required the state’s Insurance Commissioner to approve any rate increases for individual and small group health insurance plans before those rate hikes took effect.  If the state’s Insurance Commissioner determined that a rate hike was unreasonable or excessive, the commissioner could veto the hike.  The proposition’s “No” vote means that the Insurance Commissioner continues to have the authority to review, but not approve, rates for individual and small group health insurance plans.

If passed, Prop 45 would have impacted the rate increases for upwards of 6 million policy holders. Voters rejected Prop 45 by nearly a 60 percent to 40 percent margin, despite support for the measure from U.S. Senator Dianne Feinstein and the California Democratic Party Executive Board.  However, concerns in some quarters that Prop 45 would have undermined the power of California’s state health benefits exchange (“Covered California”) to bargain with insurers to create a range of options for consumers by letting the Insurance Commissioner reject practically any element of each plan the exchange approves were echoed by an editorial, “No on Proposition 45”, appearing in the LA Times on September 30, 2014.  Some of the sharpest critics of Prop 45 included some of the members of Covered California’s board of directors, while at the same time the Insurance Commissioner was reported in an LA Times article on August 22, 2014 to have argued that there’s no merit to the exchange’s criticisms and that board members know rate regulation is no threat to the Affordable Care Act.

The powers that would have been granted under Prop 45 have been granted to insurance regulators in other jurisdictions, including several states that have insurance exchanges.  Approximately 35 U.S. insurance jurisdictions grant their insurance regulator some authority to veto rate increases on health insurance premiums that the regulator considers excessive or discriminatory.  For example, New York Ins. Law § 4308(b) states, “The superintendent may refuse such approval if he finds that such premiums, or the premiums derived from the rating formula, are excessive, inadequate or unfairly discriminatory, provided, however, the superintendent may also consider the financial condition of such corporation in approving or disapproving any premium or rating formula.”

The scope and application of this authority varies jurisdiction-to-jurisdiction with some states extending it to all forms of health insurance with others limiting it to small group or individual plans.