Healthcare Business News

Reform Update: Healthcare interests spending big in Calif. fight over premium regulation

By Paul Demko
Posted: August 29, 2014 - 3:30 pm ET

Normally, backers of a ballot initiative that polls show has support from 7 out of 10 registered voters could sit back and start planning their victory party. But that's not the case with California's health insurance-focused Proposition 45.

Powerful, deep-pocketed healthcare and business interests are aligned against the measure, which asks voters to give the state's insurance commissioner the authority to approve or veto health insurance premium rate hikes. Among those opposed are the California Medical Association, the California Hospital Association, the California Chamber of Commerce and the state's health plans.

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At the end of July, Californians Against Higher Health Care Costs, the main opposition group, had $35 million on hand of more than $37 million raised, according to filings with the California Secretary of State's Office. That formidable war chest was built from contributions including $12.5 million from WellPoint, $14.3 million from the Kaiser Foundation Health Plan and $9.5 million from Blue Shield of California. For the latter two entities, half of their contributions were in the form of loans to the campaign.

By contrast, supporters of the referendum, which includes California Insurance Commissioner Dave Jones, a Democrat, had less than $200,000 on hand at the end of July.

That means opponents of the ballot measure are poised to dominate the airwaves as the campaign heats up in the coming weeks.

But a statewide Field Poll (PDF) released earlier this month found 69% of registered voters were leaning towards supporting the referendum, while just 16% opposed it.

“When you're standing with 7 out of 10 Californians, you have to feel really good,” said Jamie Court, president of Consumer Watchdog, an advocacy group that helped put the referendum on the ballot. But the opponents' war chest has replaced those good feelings with concerns about what voters will do on election day.

Perhaps as significant as the lopsided financial advantage that opponents of Proposition 45 enjoy is the stance of Covered California, the state's insurance exchange. In a report issued earlier this month (PDF), Covered California's Executive Director Peter Lee warned that Proposition 45 could have a “significant detrimental impact” on exchange operations.

Specifically, exchange officials are worried that the new regulatory process would undermine its “active purchaser” authority to negotiate with insurers over the details of plans they want to sell through the marketplace. Lee also questioned whether the referendum could jeopardize exchange subsidies for state residents, wreak havoc with the federally mandated annual open-enrollment period and cause health plans to drop out of Covered California.

“In the end, the scope, shape and nature of those impacts are now uncertain and will be uncertain until and unless the initiative passes,” Lee said at a board meeting earlier this month.

Susan Kennedy, a member of the Covered California board, went even further, suggesting that the ballot referendum's passage could jeopardize the success of the Patient Protection and Affordable Care Act nationwide. “Even under a best-case scenario it adds delay, confusion, litigation, risk of retroactive rejection and cost to the process of negotiating benefits,” said Kennedy, who served as chief of staff to former Republican Gov. Arnold Schwarzenegger. “Covered California is in the process of implementing probably the most complicated healthcare reform initiative in the last century.”

Covered California's opposition could carry weight with voters. The exchange was one of the most successful in the country with 1.4 million enrollments during the initial sign-up period. The Field Poll found that 56% of respondents were satisfied with their experience utilizing the exchange's website and that an equal number of registered voters support the ACA.

Micah Weinberg, senior policy advisor to the Bay Area Council, a business-backed public policy advocacy organization, shares the concerns of Covered California officials. In particular, he worries that the new regulatory scheme put in place by the ballot referendum would be incompatible with the requirements of the ACA. “The concerns about this specific construction of rate regulation are shared very, very broadly among the people who follow this policy closely,” Weinberg said.

But supporters of Proposition 45 are dismissive of the doomsday claims made by Covered California officials, suggesting that they've lost sight of the public's best interests. “I think that Covered California is unwilling to have anyone looking over their shoulder, but the public wants it and needs it, because they keep facing the runaway train of rate hikes,” Court said.

Last month, Covered California announced that the average premium for exchange plans would increase by 4.2% for 2015. Lee hailed the modest increase as evidence that the exchange's active purchaser authority is yielding favorable outcomes for consumers.

But Court dismissed it as a propaganda move. “Health insurance companies know better than to spit in the eye of policy holders before they go to the ballot to vote on rate regulation,” he said.

Proposition 45 isn't the only contentious healthcare-related ballot initiative that California voters will consider in November. Proposition 46 would raise caps on medical malpractice claims from $250,000 to more than $1 million. It also would mandate drug and alcohol testing for all doctors with hospital privileges, and require that physicians utilize a database for tracking addictive prescription drugs. That ballot initiative also proved popular in the Field Poll, with 58% inclined to support it, compared to 30% leaning toward voting against it.

Wisconsin voters oppose ACA, but favor Medicaid expansion

There's abundant evidence that voters strongly oppose the federal healthcare law, but tend to support many components of it. The latest evidence comes from Wisconsin. A recent Marquette University Law School poll (PDF) found that 51.9% of likely voters oppose the healthcare law, while just 37.5% support it. But Medicaid expansion, a key component of the law, was backed by 56.3% of voters, with just 30.7% opposed to it. The issue could play a role in the state's gubernatorial contest, with incumbent GOP Gov. Scott Walker, who has opposed expansion, locked in a dead heat against his Democratic challenger, Mary Burke, according to the Marquette poll.

California Legislature backs narrow-network restrictions

The California Assembly passed legislation this week that puts restrictions on health plans' use of narrow networks. The legislation has already passed in the state Senate and is now headed to the governor's desk, according to California Healthline. The California Association of Health Plans is opposed to the proposal, which would require insurers to file annual reports documenting the adequacy of their networks, based on guidelines developed by the California Department of Managed Health Care. Narrow network products offered by insurers through the Covered California marketplace have sparked controversy. Lawsuits have been filed against both Anthem Blue Cross and rival Blue Shield of California for purportedly misleading consumers about their provider networks.

Follow Paul Demko on Twitter: @MHpdemko

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