Watchdog Group Going For Insurance Rate Initiative

With the assembly bill to more tightly regulate health insurance rates practically dead, one consumer group is trying a new tactic: putting the issue before voters in November. Consumer Watchdog, the Santa Monica organization that also backed AB 52, is spending what it thinks will be at least $1 million to collect 505,000 signatures in favor of regulation that would give the Insurance Commissioner power to set health insurance rates. “Legislators have failed the last six years to pass a law to protect consumers,” said Carmen Balber, Washington director of Consumer Watchdog. “We think it’s time to bring this issue to the public.” The issue is a critical one for the Valley as the area is a major hub for health insurers such as Health Net, Anthem Blue Cross, Kaiser Permanente and Blue Shield of California, which collectively employ more than ten thousand employees in the Valley. A new organization last week formed to oppose Consumer Watchdog. Californians Against Higher Health Care Costs, based in Studio City, is made up of the state’s four largest insurance companies, and is supported by the California Hospital Association, the California Medical Association, the California Chamber of Commerce and the California Association of Health Plans. Last year, during the fight to defeat AB 52, opponents also included the Valley Industry and Commerce Association, though VICA said it cannot officially take a position on the issue until after the measure qualifies for a vote, which has to happen by May for the measure to go before voters in November. The stakes are high and following last summer’s heated debate surrounding the attempt to pass AB 52, this new battle promises to be no less fever-pitched. The same day the new group formed to fend off the attempt at greater regulation, the two sides were already on the attack. “Californians” accused Consumer Watchdog of being a lackey of trial lawyers and Watchdog fired back, accusing “Californians” of being nothing but a health insurance lobby “hiding behind the lab coats of doctors,” as Jamie Court, president of the organization put it in a press release. When it comes to the core issues, both sides have legitimate points. Consumer Watchdog is right to call attention to the state’s outsized health insurance rates, which at $5,970 for an individual and $15,724 for a family, is meaningfully higher than the rest of the country, according to the California Health Care Foundation. And, as the Foundation points out, health insurance costs California businesses substantially more than businesses elsewhere as they contribute a larger than typical share. No wonder that businesses offering coverage has declined to 63 percent from 73 percent in the last two years, as the Foundation notes in a December 2011 study. But the Californians group is also right to note that rising rates are driven by complex factors and underlying causes. The organization notes that 87 cents out of every $1 in insurance goes to hospitals, doctors, labs, prescription drugs and other costs of care. Only three cents goes to health plan profits. It’s pretty slim compared to the 15.9 percent profit margin of drug manufacturers or the average 11.6 percent margin of medical device makers, as the group notes. Californians also is right to note that more regulation will create a bigger bureaucracy that may not be necessary given that health insurance rates are already reviewed and excess profits are limited under current law. Insurance Commissioner Dave Jones would like to have authority over health insurance rates, but as the insurance industry and health care groups note, that would be tantamount to “arbitrary price control that fails to address the underlying drivers of cost,” as spokeswoman Fiona Hutton pointed out. The result could be diminished care as insurance companies are forced to cut what they pay providers for care, she noted. The group also has a point in taking Consumer Watchdog to task for benefiting from the proposed regulation. As an intervener in auto and home insurance rate hike proposals, Consumer Watchdog has earned, according to its president, $2.5 million in attorney’s fees over 10 years. Court said Consumer Watchdog’s work has won consumers $2.3 billion stopping rate hikes. “The reality is we have saved consumers a great deal of money fighting insurance rate hikes,” Court said. “That’s just 25 cents for every $100 saved,” he said. This is a complex issue that deserves public debate. But as the issue moves from legislature to the court of public opinion, it is the complexities that often get lost, as we already witnessed from the accusations that flew last week. We expect nothing less than a bare-knuckled fight as Consumer Watchdog attempts to collect the necessary 505,000 signatures needed to put the issue before voters in November. But we also hope that rather than point fingers and cast blame, the sides will spend some time educating voters about the complexities behind the rising cost of health care. And with any luck, maybe even identify some lasting solutions. Staff Reporter Judy Temes can be reached at (818) 316-3124 or at [email protected].