Election 2014 FAQ: Prop 45 — health insurance rate changes

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Proposition 45 is an initiative statute placed on the ballot by voter petition. It is also referred to as the Insurance Rate Public Justification and Accountability Act.

Who's behind this ballot measure?

The advocacy group Consumer Watchdog has led the effort to pass Prop 45.

In 1988, voters passed Proposition 103, creating the elected position of insurance commissioner to help oversee and regulate rates for automobile and homeowner's insurance. Prop 45 seeks to add health insurance to the list.

What would it do?

If approved, Prop 45 would:

• Require individual and small group health insurance rates to be approved by California's Insurance Commissioner under the same process created by Prop 103, which includes rules for holding public hearings and allows for appeals from the various stakeholders. About 16 percent of Californians currently pay for such coverage, while the majority receive health benefits through government programs or large group employer plans. 
• Maintain the current regulatory authority of the Department of Managed Health Care, which has the power to review but not reject certain health insurance rates.
• Require insurance companies to cover the costs of administering Prop 45 through fees.
• Prohibit a person's credit history or lack of prior coverage from being used to determine eligibility or rates for health, automobile or homeowner's insurance.

How is this different from existing laws?

According to the Legislative Analyst's Office, currently:

• The DMHC and the California Department of Insurance (which is run by the insurance commissioner) review rates on certain types of health insurance and declare whether increases are fair and reasonable, but they do not have the power to approve or reject those rates.
• Covered California, the health insurance exchange created by the Obama Administration's Affordable Care Act, negotiates on plan benefits, including premiums, with health insurers that want to sell through the exchange.
• Laws already exist to prohibit credit history or lack of existing coverage from being used to set rates or determine eligibility for health insurance. To a certain extent, such factors are allowed for homeowner's and auto insurance, though companies have not generally used them.

How much will it cost taxpayers?

The overall impact on state and local governments is not likely to exceed the low millions of dollars annually, and those costs would be funded by the fees paid by insurance companies, according to the LAO. However, the LAO does lay out how Prop 45 could potentially impact other agencies, including:

• The DMHC. Given the insurance commissioner's new authority to regulate health insurance rates, it's possible the DMHC could reduce or eliminate its own review activities, which would result in savings of several hundred thousand dollars a year. However, it's also possible the commissioner's actions could result in a greater regulatory workload, which would increase costs.
• Covered California. Prop 45 could lead to a delayed approval process for certain small group and individual health products, which could have a number of consequences for the state and consumers. A long delay, for instance, could result in a plan not being offered during open enrollment, the once-a-year window for insurance exchange shoppers to jump into a new plan. That could lead to increased costs for Covered California as it provides assistance to consumers looking to switch plans. It is unclear, however, whether or how often such long delays would occur.

More: Read the full LAO analysis here

How much money's being spent on the campaigns?

Who's supporting it and why?

As of September 24, Consumer Watchdog had contributed more than half the total funding for Prop 45, with $500,000. Personal injury law firm Greene Broillet & Wheeler and National Nurses United, a labor union representing registered nurses, also donated substantially to the Yes on 45 campaign.

Supporters argue that the measure is needed to stop a steady increase in health insurance premiums and that 35 other states already have the authority to regulate rate hikes.

Arguing in favor of Prop 45 on the ballot are Deborah Burger, president of the California Nurses Association; Jamie Court, president of Consumer Watchdog; and Dolores Huerta, the civil rights leader who marched alongside Cesar Chavez.

More: Yes on 45 campaign

Who's opposing it and why?

Three health insurance companies have contributed nearly all of the funding to the No on 45 campaign — Kaiser Permanente with nearly $15 million, WellPoint with $12.5 million and the Blue Cross Blue Shield Association with nearly $10 million.

Opponents argue that too much power is being placed in the hands of one elected official — the insurance commissioner — and that more time is needed to see how effective Covered California will be in helping to regulate costs.

Making the arguments against Prop 45 on the ballot are Monica Weisbrich, president of the American Nurses Association of California, an advocacy group; Dr. José Arévalo, chair of Latino Physicians of California; and Allan Zaremberg, president of the California Chamber of Commerce.

More: No on 45 campaign

…a YES vote means…

You accept the proposed changes: the insurance commissioner will have the power to approve or reject health insurance premiums, insurance companies will cover the administrative costs of regulation through fees, and credit history and lack of prior coverage will not be permissible factors in determining rates and eligibility for health, homeowner's or auto insurance.

…a NO vote means…

You reject the proposed changes: the Department of Managed Health Care and the California Department of Insurance will continue to have the power to review but not to approve or reject health insurance rates.

What else is being reported on this measure?

• Prop 45: Will it help or hurt consumers?
• Read the official voter guide

And there's this explainer put together by SeePolitical, a nonprofit organization that aims to help voters by decoding complicated political issues with accessible video content:

Video

Para ver en español, haz clic aquí.

Poll: Do you support Prop 45?

Poll: Are you in favor?

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