Small businesses in California have seen $250 million in health insurance rate hikes that regulators deemed unreasonable but were powerless to stop without the rate regulation in Prop. 45. Now health insurance companies are using $37 million of that money to fight the ballot measure, which is backed by the California Nurses Association. Why? Because they know that passing Prop. 45 will stop health insurance rip-offs.
Four big insurance companies control more than 84 percent of the market of six million individuals and small businesses that have been price gouged and will be helped by Proposition 45. We hear the stories all the time. Ron Blasco, owner of a small real estate brokerage in Rancho Cucamonga, complains that his rates have gone up 1,000 percent since 1997 — to $2,386 a month. No wonder he says he can’t retire.
Diana Guth, therapist and owner of Los Angeles–based Home Respiratory Care Sleep Solutions, is committed to providing her 14 employees with health insurance. But she has watched her premiums jump 37 percent in four years while offering ever-smaller benefits. “Despite the fact insurance companies are sitting on billions, our rates keep going up,” said Guth. “I’m paying to build their business, not mine — and it needs to stop.”
That’s why Blasco and Guth are voting “yes” on Prop 45. It’s the initiative that finally gives California the power to reject excessive rates.
The insurance companies, of course, don’t want their opposition to be known, so they have hidden in a deceptive advertising and marketing campaign waged by surrogates paid by the health insurance companies or who have financial ties to it. The insurance companies want you to believe rates are reasonable without Prop. 45’s regulation, but they are not.
California’s health insurance premiums have risen 185 percent since 2002 — five times faster than inflation. Right now, there is no federal or California state law to stop it. Proposition 45 fixes this by requiring health insurance companies to justify rate hikes before raising rates on six million individuals and small businesses.
Prop. 45 makes the insurance commissioner the umpire over whether rate hikes are excessive and creates transparency so the public knows whether rate hikes are reasonable. We all have to buy health insurance, so there should be a guarantee that it is affordable.
Health insurance companies want you to believe that voluntary government negotiation through Covered California is enough to keep rates as low as possible. But can government purchasing have enough leverage when four health insurance companies control 94 percent of the market of the purchaser, Covered California? Prop 45. also protects an additional 4.8 million individuals and small businesses outside of the state exchange, none of which get subsidies; all need rate relief even more.
Thirty-five other states require health insurance companies to get permission before raising rates, but not California. State regulators with the power to veto rate hikes are able to deliver rate reductions to policyholders on their health exchanges. In Oregon, the average premium for comparable plans will drop on average 4.6 percent, while Californians’ premiums will rise. Covered California needs the same leverage for its 1.2 million enrollees.
Consumers need Proposition 45’s regulatory stick, as well as Covered California’s negotiation carrot. Rate regulation was the missing link in the Affordable Care Act. That’s why Senators Dianne Feinstein and Barbara Boxer back it.
Prop. 45 simply extends to health insurance rates the proven regulation of auto and home insurance that voters enacted in 1988. California drivers now pay less in real dollars for insurance than they did 25 years ago — the only state with such success.
Key to auto insurance reform’s success was not only creation of the office of an elected insurance commissioner, directly accountable to the voters for lower rates, but also the same consumer participation system that applies to electricity rates. Consumers can challenge unreasonable auto, home, and business insurance rate hikes. Since 2002, over $3 billion in proposed rate hikes have been stopped by consumer group challenges.
Rate relief has proved an undeniable consumer triumph for drivers. Those required to buy health insurance under federal law deserve the same protection. Health insurance companies are spending $37.5 million to stop Prop. 45 because they want to keep consumers at their mercy. Don’t let them.
Jamie Court is president of Consumer Watchdog and the proponent of Prop. 45.