Featured Health Business Daily Story, Dec. 2, 2010

New California Insurance Commissioner Jones Seeks to Rein In Premium Increases

Reprinted from AIS's HEALTH REFORM WEEK, designed to help savvy business leaders in health care understand what the enormous changes mean to them ... and what they can do about it.

November 15, 2010Volume 1Issue 22

Newly elected California Insurance Commissioner Dave Jones (D) says he plans to hit the ground running by reining in excessive rate hikes while maintaining an active voice in the development of the health insurance exchange program.

Addressing the new Republican gains in the elections and the challenges to health reform, Jones says people need to look beyond the rhetoric, and at the reform law’s individual parts. “There are a number of immediate benefits provided to Americans and to businesses.…I believe once people obtain those benefits, they’ll see the value in keeping reform intact,” Jones tells HRW, challenging the views of his Republican predecessor Steve Poizner, who contended the statute was unconstitutional and would contribute to the state’s fiscal problems.

State insurance commissioners obtain their positions either through a governor’s appointment or the election process. Four new insurance commissioners were voted into office Nov. 2, among them Jones, who defeated fellow state Assemblyman Mike Villines (R), and Ralph Hudgens (R), who succeeds Republican John Oxendine in Georgia. In Oklahoma, John Doak (R) unseated incumbent Kim Holland (D), while Sandy Praeger (R), who chairs the National Association of Insurance Commissioner’s Health Insurance and Managed Care Committee, was re-elected unopposed in Kansas (HRW 11/8/10, p. 1).

Recent media reports have questioned how influential these commissioners will be in crafting health reform policy. There’s no doubt they will continue to serve as relevant leaders in their state, Alan Weil, executive director of the nonpartisan National Academy for State Health Policy, tells HRW. “Certainly on the ground the insurance commissioner is going to be very involved in the oversight of plans, particularly the rating provisions, which are a key part of the law.”

On other reform matters, however, such as the design of the insurance exchanges, he says, “their voices will be one of many other players,” such as the governors and “even the Medicaid state agency or independent boards” appointed to create these things, Weil says.

“The exchanges have multiple functions, the primary one being to enter into contracts with health plans, and the second one is to deliver subsidies to moderate-income families, and neither of those are traditional insurance commissioner functions,” Weil says.

Jones sought to challenge some of those views in an interview with HRW. The reform law carves out a very explicit role for the insurance commissioner: “It says both [HHS] as well as the exchange authority in each state needs to consult with and confer with the commissioner in drafting of regulations and implementation of the exchanges. I plan to play a very active role in that process,” says Jones, adding that he’ll be working with California’s newly established exchange authority to accomplish these tasks.

In developing the exchanges, “I think one of the most important things we need to address is making sure that the health insurance companies and HMOs do not have the ability to essentially cherry-pick healthy lives outside of the exchange and just leave in the exchange those who are ill or who have a high propensity for illness. That would undermine success of the exchange,” Jones says.

Rate Hike Authority Exists for Other Insurance

Jones also plans to work toward his long-time goal of granting California’s insurance commissioner the authority to reject excessive rate hikes. “I continue to believe it’s one of the missing pieces of national health care reform,” he says. The commissioner already has such authority under a state constitutional provision known as Proposition 103, which applies only to auto, property and casualty insurance.

Insurers have “vociferously opposed my legislation in the three prior sessions [of the state Assembly], and I have every belief they will continue to do so, but in wake of these double-digit increases year after year, there’s a growing awareness among California voters that this is a reform that’s badly needed,” he says.

State legislation to limit insurers to just one rate hike a year was vetoed on Sept. 30 by Gov. Arnold Schwarzenegger (R). The outgoing governor reasoned that the bill was premature since the federal government already was working with states to establish a process for the annual review of unreasonable premium increases (HRW 10/4/10, p. 5).

California’s legislature did pass a law this year, however, “that will require information on cost drivers of health insurance premiums and independent actuarial analyses of rates. So regulators will have the ability to review all of that data as required now by state law and the new reform law,” Patrick Johnston, president of the California Association of Health Plans, tells HRW, adding “we should give these statutes a chance to work.”

Blue Shield of California and Anthem Blue Cross in California both declined to comment.

On the issue of medical loss ratios, Jones said he was generally pleased with the NAIC’s MLR recommendations (HRW 10/25/10, p. 1), although he conceded there are areas that HHS Sec. Kathleen Sebelius could seek to improve upon in its forthcoming regulations. “Specifically, I was disappointed to see a number of federal and state taxes [beyond what the Democratic authors of the bill had intended] were allowed to be included as a part of the calculation,” he says.

As Jones vows to rally for the health reform law, new Republican commissioners are just as likely to oppose it. While unavailable to provide comment to HRW, Hudgens in a recent radio interview opined that “the insurance commissioner ‘can’t do squat on the health care law,’” says Stephen Northington, president of Group Insurance Solutions, LLC, an insurance brokerage firm. Northington ran against Hudgens in the primary for commissioner, but lost along with several other candidates.

“Certainly the rest of us in the race were in a very different position on that because we felt the insurance commissioner’s office can do something with regard to the regulations being written,” Northington tells HRW.

He adds that Hudgens has probably changed his mind since the interview. “I do believe he is going to oppose the health care reform law, and I know the attorney general is as well.” The two offices in all likelihood will work together to make sure that Georgia espouses that position, he says.

Georgia had previously decided not to participate in the reform law’s high-risk pool program on the basis that it would be too costly for the state, Northington says. The state, however, did accept the $1 million HHS provided to set up its health insurance exchange, “so my guess is the insurance commissioner’s office is going to move forward with putting the exchanges in. My hope is the state would…not give more power to the federal government, and I would assume Ralph would have that attitude as well.”

Contact Jones at assemblymemberdavejones@gmail.com, Weil at aweil@nashp.org and Northington at stephen@groupinsurancesolutions.net.

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