Rate regulation initiative raises big questions for Covered California

Sacramento Business Journal by Kathy Robertson –

June 23, 2014:

A health insurance rate regulation initiative on the November ballot poses big questions about operations at the state health benefit exchange, including whether the measure, if approved, could muck up open enrollment at Covered California this fall.

If the Insurance Rate Public Justification and Accountability Act is approved by voters, it would take effect Nov. 5, 2014, 10 days before kick off of open enrollment for 2015. The measure would give state Insurance Commissioner Dave Jones authority to reject health insurance increases considered “excessive.”

An independent state agency, Covered California can’t weigh in on political issues, so staff and the board raised questions about the initiative at a board meeting Thursday — but didn’t take a position. Concern was clear, however.

“What is it and what could it do?” posed board member Susan Kennedy. “I’m a little afraid we are tip-toeing around this. I’m afraid the effects would be huge and the risk may be felt in rates.”

Some answers may be available at a joint legislative hearing by the Assembly and Senate health committees scheduled for July 2 at 1:30 in Room 4203 at the State Capitol. But there were more questions than answers at the Covered California board meeting last week.

If the commissioner doesn’t identify excessive rates, the measure won’t have much affect on Covered California, Leesa Tori, interim health plan manager for the exchange, told board members. “But with rate review hearings, it could change the timeline — and that raises questions about what we do. Quite frankly, some of our rates would have to go to hearing, some not,” she said.

There are questions about how rate regulation could affect consumers with subsidies — and not, Tori added. The measure defines rates as charges associated with health insurance, including but not limited to benefits, premiums, base rates, underwriting, deductibles, premium financing, installment fees and other out-of-pocket costs.

How the measure may affect standard benefit design at Covered California and what happens if rates are not approved in time for open enrollment — or the marketing period that proceeds it — are big questions, too.

“How can we absorb this kind of change in our operation — and how early do we need to do this?” Tori posed.

The initiative is modeled after Proposition 103, which regulates auto rates. That’s a different insurance market, raising questions about effects on health insurance. While successful in California — as is health insurance rate regulation in other states that have tried it — implementation in California is complicated by the fact that health insurance is overseen by two regulators: the California Department of Insurance and the California Department of Managed Health Care. Most Covered California plans are regulated by the latter, although some preferred provider organization plans are under Jones’ purview.

Both the Department of Insurance and Department of Managed Health Care reviewed first-year rates at Covered California — and got some lowered without causing delays, deputy insurance commissioner Janice Rocco told board members. More information will be provided at the July 2 hearing.

The proposed ballot measure allows outside parties to challenge benefits and rates set by Covered California, raising questions about whether this process could delay operations, too.