YES OR NO ON CALIFORNIA PROPOSITION 45
Nasir Pasha, Esq.

Yes or No on California Proposition 45? (Rejected on 11/4/2014)

With the midterms only a week away, election madness is in full swing. In California, voters will have the opportunity to approve or reject Proposition 45.  The measure, championed by Consumer Watchdog, is designed to do five things:

  • Require changes to health insurance rates, or anything else affecting the charges associated with health insurance, to be approved by the California Insurance Commissioner before taking effect.
  • Provide for public notice, disclosure, and hearing on health insurance rate changes, and subsequent judicial review.
  • Require a sworn statement by health insurers as to accuracy of information submitted to the Insurance Commissioner to justify rate changes.
  • Exempt employer large group health plans under any circumstances.
  • Prohibit health, auto, and homeowners insurers from determining policy eligibility or rates based on lack of prior coverage or credit history.

That much is clear. The second thing that is clear is that the single biggest concern for small employers is medical insurance costs. There also seems to be a general consensus that, although costs continue to go up, the rate of increase seems to have moderated.  This may be because of the provisions of the Affordable Care Act, as implemented through Covered California.  The question is whether passage of Prop 45 will make that trend better or worse.

End of clarity.  The answers offered by the political debate have been remarkably information-free, and tend to divide along predictable political lines.

The Case that Prop 45 will Bring Down Costs for Small Businesses

Once voters sift through the theatrics, which in this case really did involve a load of steer manure, they will see that supporters of Prop 45 essentially argue that health insurers’ anti-competitive behavior keeps costs artificially high.

They point to market concentration, citing the fact that 84 percent of the individual and small business market business in California is controlled by four insurers. They also allege cronyism, noting Covered California’s own admission that it awarded $184 million in contracts without the competitive bidding and oversight that is standard practice across state government.

Supporters of Prop 45 generally argue that oversight by an independent, elected commissioner would permit the market to work in a way that would reduce prices to consumers. As precedent, they point to the fact that  over the past 12 years, the insurance commissioner has rejected more than $3 billion in rate increases for auto, property and medical malpractice insurance.

To be fair, though, the analogy between auto and health insurance rates is not perfect.  Covered California already has a mechanism to regulate rates, however inadequate Prop 45 supporters find it.  The law would add a second layer of bureaucracy.

Among prominent supporters are: U.S. Senator Dianne Feinstein, U.S. Senator Barbara Boxer, Insurance Commissioner Dave Jones, the California Democratic Party, Consumer Watchdog, the California Nurses Association and AFSCME District Council 57.

The Case that Prop 45 will Drive Up Costs for Small Businesses

Opponents see risk in concentrating power in the hands of the commissioner, arguing that an elected individual might act to limit patients’ treatment options for political reasons.  They further argue that the creation of a duplicative oversight bureaucracy will drive consumer costs up.

According to the California Secretary of State , the fiscal impact of the measure would likely be

  • 10 Tips to Prevent Business Litigation

    September 24, 2015

    An ounce of prevention, as they say, is really just sound business practice. Litigation can be ruinously expensive and may force a business into liquidation. Even a “win” can devour the time and energy you need to …

  • The Cost of Converting Independent Contractors to Employees

    October 06, 2015

    While Uber may be receiving the lion’s share of the attention on the topic, there has been no shortage of court rulings, IRS audits, and labor decisions on the issue of workforce misclassification. With a …

  • Must-Reads if You Are Thinking About Buying a Business

    September 18, 2014

    If you are thinking about buying a business, you must have lots of questions. Of course, you should get some help with this process -- from your banker, your attorney, your accountant, and possibly a …

  • Is PTO Enough When Paid Sick Leave Is Required?

    January 19, 2016

    Look around your office. Is anyone out sick today? (Alternatively, is someone who is in the office clearly too sick to be there?) According to Bloomberg BNA, sick leave will be a big issue for …

  • Product Liability 101 for Small Importers

    September 16, 2014

    Global sourcing has lots of exciting potential. The recent entry of Alibaba.com onto the global stage along with others such as the FITA Buy/Sell Exchange, Euro Pages and Global Sources seems to presage a new …

  • What to do When a Customer Accuses an Employee of Theft

    July 02, 2015

    This is one of those managerial headaches that may make life on a desert island look attractive. You don’t want to lose the customer or expose your business to accusations of wrongdoing, but you also …

  • Can An Employer Be Held Liable For An Employee's Facebook Post? [e259]

    March 14, 2016

    The guys kick off the week by discussing the lawsuit in Hawaii where an employee posted a defamatory remark about a customer and tried to hold the employer liable. They also discuss the new anti-discrimination and …

  • What Should I Pay My Employees?

    October 21, 2014

    If your small business is about to begin to hire its first employees, you may be puzzled about how much to pay them. If you offer too little, you won’t be able to hire who …

  • Should You Finance the Sale of Your Business?

    September 30, 2014

    Truthfully, most sellers don’t want to take back paper. An all-cash deal often looks like the easiest and cleanest way to get on to the next venture, much preferable to waiting for another 5 to …

  • Advertising & Marketing: A Legal Guide for Small Business

    December 16, 2014

    Staying compliant with advertising and marketing is simple if you focus on just being truthful and clear with your customers. The rest is just understanding some subtleties on how to navigate the common legal traps in …

increased state administrative costs to regulate health insurance, likely not exceeding the low millions of dollars annually in most years, funded from fees paid by health insurance companies.

There are also plenty of ad hominem attacks, the usual inflammatory nonsense, with opponents taking a swing at trial lawyers and unnamed “special interests,” and supporters drawing a bead on rich CEOs.

Among prominent opponents are: the California Republican Party, California Chamber of Commerce, California Medical Association , California Hospital Association, California Association of Rural Health Clinics, NAACP California, State Building and Construction Trades Council of California, and Imperial County Building and Construction Trades Council.

Either way, California voters will have a chance to decide on November 4. Because predictions about the future tend to rely so heavily on ideology, it looks like the divide will fall along partisan lines.

Read More