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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

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.

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