Opposing Sides Testify Before State Committee over Insurance Proposition

State insurance commissioner Dave Jones is flatly rejecting accusations that a proposition on November's ballot would undermine the implementation of the Affordable Care Act in California.

If passed by voters, Proposition 45 would give the commissioner the power to reject excessive rate hikes for health insurance –- and, he argues, keep health premiums affordable for consumers. Last month, Covered California, the state’s health insurance exchange, said the measure could compromise its operations, possibly causing delays in approving health plans before they are federally mandated to go on sale to consumers, or curtailing its own authority to negotiate the details of plans with insurers.

“These conclusions are fundamentally flawed,” Jones said on Wednesday, speaking before the state’s joint legislative committee on health.

Jones issued a letter to the members of the committee detailing responses to the concerns and questions raised by Covered California. He said delays were unlikely given the small number of health insurers (40) and plans (100 per year) the commissioner would be tasked with overseeing under the initiative. This is compared to property insurers (500) and rate filings (7,000 year) currently overseen by his department.

He also emphasized that the scope of review under the measure would be limited to rates only. Covered California officials called the wording of the proposition “broad,” and said it could be interpreted to grant the commissioner power to review not only rates, but also specific benefits of health plans and the network of providers included in a plan.

“It doesn’t. It doesn’t,” Jones said at the hearing. He argued that if voters do not pass the proposition, California would see less competition in the health insurance market, leaving consumers with less choice and ever-increasing health insurance premiums. He said Covered California failed to negotiate better rates for consumers last year, noting premiums on individual plans for 2013 had increased between 21 and 88 percent the following year.

Peter Lee, executive director of Covered California, said there is more to plans than just the premiums. Testifying at Wednesday’s hearing, he conceded on the point of timing, expressing new confidence that his and Jones’ agencies could work together to meet federally set deadlines for approving health plans before the start of open enrollment in mid-November. However, he said there could still be negative implications.

His main concern is that health insurers will simply withdraw their plans from the marketplace if the rates are rejected by the commissioner. This would leave consumers with less plans to choose from, and complicate how federal subsidies are calculated for all the consumers in that region. Subsidies, the financial assistance provided by the federal government to pay for plans, are calculated based, in part, on the number of plans available for sale in a particular market and prices. If one plan withdraws, or offers the previous year’s plan at the previous year’s rate, that complicates the calculation.

“The only thing we can be sure of is the uncertainty of the products that would be available,” Lee said.

Lee also responded to questions from committee members who worried that the measure would cause health insurers to become singularly focused on keeping rates down at the expense of the benefits included in health plans.

“People can get something cheap, but it may not have a good value,” said Assemblymember Richard Pan (D-Sacramento). “I hear from physicians who take care of minority populations. It is important that they are part of networks…and it is important for Covered California to make sure we have plans that pay attention to those things.”

Lee said the measure might compromise Covered California’s power to negotiate these plan designs, as well as efforts to promote innovation among plans. He said his agency wants to encourage plans to try new care delivery models or payment models that emphasize preventive care and could ultimately result in better health for patients in the long term.

“It may be that contracting with them costs more on the front end, but has better back end results in terms of outcomes,” he said, adding that the opportunity to experiment with these models could be lost of insurers focus only on providing the cheapest plan now. “This ripple effect is one of the big uncertainties.”

Members of the joint committee called on both sides to conduct further analysis.