PD Editorial: No on 45: Affordable Care Act needs time

In California, auto and home insurers must secure approval from the state insurance commissioner before raising rates. Health insurers face no such requirement.

Three years ago, after Blue Shield of California announced a 59 percent rate hike for individual policyholders, we editorialized in favor of Assembly Bill 52, legislation co-authored by then-Assemblyman Jared Huffman, D-San Rafael, to extend the commissioner’s regulatory authority to health insurance premiums.

Huffman’s bill cleared the Assembly, but it’s progress stalled in the state Senate. Proposition 45 on the Nov. 4 ballot is modeled on AB 52.

California consumers have benefited from regulation of auto insurance premiums since voters approved Proposition 103 in 1988, and they might benefit from similar oversight of health insurance premiums for individuals and small groups.

Yet we cannot recommend approval of Proposition 45.

Why not?

It’s been just one year since the most sweeping provision of the Affordable Care Act took effect - the requirement that most individuals obtain insurance. To make that possible, the act authorized state health exchanges, such as Covered California, to negotiate coverage and rates with insurers, and it established subsidies to make insurance more affordable for lower- and middle-income people.

The results so far are promising.

Here in California, a Commonwealth Fund study found, the number of uninsured has fallen by half, from 22 percent to 11 percent. Covered California, the state’s health exchange, recently announced that rates for the second year will increase by a relatively modest 4.2 percent overall, with premiums for some plans decreasing as much as 8.5 percent. All 10 insurers that participated in the first year are returning in year two.

But it will take more than a year to determine whether these results can be sustained.

Adding a layer of regulatory oversight above and beyond Covered California strikes us as premature and as an unnecessary complication for an already complex program. The sponsors of Proposition 45 should have waited for a clearer picture to emerge.

Consumer Watchdog, which backed Proposition 103 and is the primary sponsor of Proposition 45, counters that several other states have regulatory oversight or allow consumer groups to play an advocacy role in setting health insurance rates. But those regulator review structures already were in place when the Affordable Care Act was enacted, so those states could account for it when they established their exchanges.

Covered California was empowered to negotiate the scope of coverage as well as premiums for policies sold on the state’s exchange. Ten insurers offer policies through the exchange, and about 1.3 million people have purchased coverage. The work done by Covered California has a broader impact on rates and availability because the law requires insurers to make policies sold on the exchange available to all state residents.

Proposition 45 would give the state’s elected insurance commissioner veto power over rates for individual policies and for policies offered by companies that employ fewer than 50 people. It would allow outside groups to intervene, and it would be retroactive to Nov. 6, 2012 - a year before the Affordable Care Act’s individual mandate took effect.

The commissioner’s oversight wouldn’t extend to people working for larger companies or those insured through Medi-Cal. The latter categories account for 77 percent of the population, according to the state’s nonpartisan legislative analyst.

Time may prove that additional oversight is necessary. But the Affordable Care Act is itself a revolutionary change in the health insurance marketplace, and its effects are still unfolding. For now, the best approach is to do no harm. The Press Democrat recommends a no vote on Proposition 45.