Ballot initiative would weaken California's exchange, report says

California's fledgling health-insurance exchange could be destabilized if voters pass a ballot measure that would grant veto authority over premium rates to the state's insurance commissioner, according to an industry-backed report (PDF) released on Thursday.

Specifically, the report concluded that Covered California, which has the authority to negotiate with health plans over premiums and benefits for products sold on the exchange, would be undermined if voters approve the ballot initiative in November. In addition, it warns that challenges to health-plan prices, permissible under the proposal, could gum up the system and make it difficult for individuals to access federal subsidies for insurance coverage available under the Patient Protection and Affordable Care Act.

“By introducing considerable uncertainty into buying individual and small-group coverage, the Initiative would undermine the transparency at the heart of Covered California,” the report concluded.

The report was written by Jon Kingsdale, who previously served as executive director of Massachusetts' health-insurance exchange. Kingsdale also has consulted with government agencies and nonprofit groups on implementation of the federal healthcare law. His current firm, Wakely Consulting Group, was paid $50,000 by opponents of the proposal to conduct the study.

The ballot measure is being pushed by Consumer Watchdog, a nonprofit advocacy group. It's modeled on a 1988 proposal adopted by California voters that allowed similar challenges to premium prices for property and casualty insurance. The current initiative is also supported by California Insurance Commissioner Dave Jones, who dismissed the report's findings in comments to the Los Angeles Times.

“This consultant's report has been bought by health insurers who are dead set against any public scrutiny that could rein in excessive rate increases,” Jones said.

The main group opposing the ballot measure, Californians Against Higher Healthcare Costs, has raised more than $25 million, according to the Los Angeles Times. Roughly half that money has come from the insurance company WellPoint.

Follow Paul Demko on Twitter: @MHpdemko