California should consider merging its two insurance regulatory agencies in the wake of the Affordable Care Act, according to a study that renews a contentious debate over how the state should oversee health plans.
California is the only state in the nation to have two agencies overseeing health insurance. The California Department of Insurance covers traditional indemnity insurance and some PPOs, while the Department of Managed Healthcare, has traditionally regulated HMOs but recently picked up some types of PPOs.
"Most observers acknowledge that California's unique dual-regulator approach complicates oversight of health insurance in the state," wrote the study's author, Deborah Kelch, a former chief consultant for the California Assembly's Health Committee.
"The regulatory framework of who's making decisions about the terms of engagement between plans and consumers is important, and it's shifted a lot with the Affordable Care Act," said Marian Mulkey, chief learning officer of the California HealthCare Foundation. "In the long run, we need to think about whether having to doing it twice (with two agencies) instead of doing it once is serving California and California consumers," Mulkey added.
The nonprofit health policy think tank commissioned the study to update a 2011 report that examined how California would implement the ACA with two regulatory agencies. That report also questioned the wisdom of having two agencies with different mandates regulating health plans.
The ACA sets standards for health insurance where states previously created insurance market rules. Covered California, the state's health exchange, leaves the responsibility to the CDI and DMHC and there is no arbiter assigned differences arise, according to Kelch.
That's been difficult and time-consuming, Kelch noted. For example, in choosing plans to offer on its exchange, Covered California must navigate financial solvency and provider network minimum standards that differ by agency. Ultimately, a small group of insurers accounted for the bulk of the health plans offered on the exchange.
And although the two agencies have managed to set the same legal ground rules for insurers, "consumers may still experience different standards because the two regulators separately interpret and enforce the law," the study noted.
A spokesman for the DMHC said officials were aware of the study but can't comment or take a position on any agency changes involving legislation, which a merger would require.
The study suggests that absorbing the CDI's health plans into the DMHC makes most sense because it regulates the largest share of state's commercial insurance markets. By the end of 2014, the DMHC regulated 82% of the individual market, 77% of the small group market and 91% of the large group market.
Janice Rocco, deputy commissioner of the CDI, had this response: "California consumers have been and are well served by having an independently elected insurance commissioner regulating health insurance."
The study suggests policymakers also could direct Covered California to contract only with insurers regulated by the DMHC. The exchange and its customers would then only have to deal with one set of regulations.
Mulkey acknowledged that there's no great groundswell of political support for merging the two agencies. The state's insurance lobby, the California Association of Health Plans, is staying out of the fray as well.
"Clearly nobody wants to yield authority or give up responsibilities that they believe are important," Mulkey said. "I don't think that there's an obvious political path forward."
In the end, Mulkey added, market forces rather than political action may put an end to the two-regulator system, particularly as the majority of Californians end up in insurance plans regulated by the DMHC.
