The Effects of Proposition 45 on the Affordable Care Act

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As November 4th approaches, ballot initiatives are causing their usual uproar in California. The closer the date gets, the more intense the pressure becomes. Proposition 45, in particular, is being both promoted and denounced heavily by anyone with an interest in healthcare costs, quality and accessibility.

 

Proposition 45 

California_Insurance_Commissioner_Dave_Jones_--_PD-CAGovIf it survives at the polls, Prop 45 will give Insurance Commissioner, Dave Jones, the sole authority to regulate healthcare costs and benefits for small businesses and individuals in California. This is about 16% of the total population of California (about 6 million people). This measure does not apply to insurance costs for larger company-sponsored plans, according to the “Yes on 45” campaign.

Prop 45 addresses all current and future health insurance rates that fall within its scope, including those currently regulated by the California Department of Managed Healthcare (DMHC) or the California Department of Insurance (CDI). Prop 45 would make their insurance rate changes subject to the same approval process as those in Proposition 103, which includes homeowner’s and automobile insurance.

Furthermore, Prop 45 backdates to November 6, 2012, making any rate after that date also subject to retroactive approval by the commissioner and refunds may be issued based on the outcome. It is not yet certain whether or not the commissioner could legally make the companies issue these refunds on policies that are no longer active.

Currently, the DMHC and the insurance commissioner have the ability to review proposed insurance rates; however, they have no power to reject them. The CMHC and CDI, when reviewing rate increases, may consider factors such as cost sharing, covered services and administrative costs. They are then required to publish pertinent information to their websites based on their findings. This way the public has access to the information.

Nonetheless, they are not able to reject or accept the rates. DMHC rate reviews would continue as is; however, the commissioner would have much more power. Also, it isn’t just premiums. Benefits and out-of-pocket expenses such as deductibles and co-pays are included in Prop 45’s definition of “rates” and are included in what the commissioner may approve.

Economic Effects

Administrative costs will likely see the highest economic change if Prop 45 goes through. State administrative costs will be paid for by money collected from health insurance companies. CDI would likely see extra costs for approval and review of rates and public hearings for rate proposals. Other costs will include the cost of disputing rate increases. The DMHC may also see an increase in administrative costs; however, it is unclear. Some even think their costs could decrease.

Covered California, a California health insurance exchange, may also see higher administrative costs. This is because the new approval process would probably cause Covered California to spend more time reviewing many of the proposals. Delays could result, and the insurance plan may have to be delayed if not approved for Covered California in time for open enrollment. There are many different ways that Covered California could incur extra charges due to the approval process.

 

Proposition 103

Consumer Watchdog, an advocacy group that wrote Proposition 45 and 103, is promoting the measure with Insurance Commissioner Jones. This measure gave the commissioner the ability to approve or reject certain types of insurance, including car insurance and homeowner’s insurance. It also allows for intervenor fees to be collected by consumer advocates and trial lawyers who contest rates. Those who have intervened have profited millions of dollars. Insurance companies pay the costs, in turn raising car insurance rates.

 

Proponents

Because the commissioner would have such a wide range of power and ability to approve health insurance costs and possibly some of the coverages, proponents say the measure will work in favor of the consumer by stopping the rate of health insurance increases, which has risen much faster than the rate of inflation for many years. Price transparency, it is said, will have the benefits that Prop 103 had on homeowner’s insurance and auto insurance costs, protecting consumers from outrageous rate increases.

 

Opponents 

Insurance companies have spent nearly $40 million to date in efforts to shoot down Prop 45, while the commissioner has raised over $1 million for his campaign. Many more seem to be speaking out against Prop 45 than pushing for its approval.

Opponents claim Prop 45 adds layers of more costly bureaucracy to a health care system that is already being tightly regulated. The Covered California Board already negotiates rates with the health insurance companies before they are allowed to participate in the exchange. They have the power to approve or reject any plan sold through Covered California as long as the plan is in line with the law. So in essence, the power that is being given to the commissioner through Prop 45 is already being utilized on California’s health exchange.

Prop 45Board members are concerned and do not want to lose their negotiating power. They say that a politician should not be the one with sole power to make decisions about healthcare and negotiations for the Affordable Care Act through Covered California, and consumers could suffer immensely as a result.

The Los Angeles Times reported that Jones responded to that particular concern by highlighting how more than 35 states in the United States have already implemented a regulatory system for insurance rates and that it did not affect the Affordable Care Act for those areas. Proponents of Prop 45 have also cited Covered California as being too tight with the insurance companies, which is not indicative of a productive and progressive business relationship.

Opponents say the people who fund the commissioner’s campaign only do so in order to help themselves gain more profits from frivolous lawsuits, citing that taxpayers will be the ones bearing the brunt of the proposition.

Concerns over the commissioner changes are also cited, the main concern being the different sides each new commissioner may take, which may create another level of uncertainty and more unwarranted changes.

The Legislative Analyst’s Office said that the measure alone could add millions of dollars every year in extra costs. Plus, because private parties can intervene and get paid to do so (up to $675 per hour), opponents say the burden of paying for the hearings would do more harm than good and would not counter any insurance savings. In fact, the costs would be passed on to the insurance companies and ultimately to the consumer. In essence, opponents believe it could result in even higher insurance premiums.

The Legislative Analyst’s Office said that the measure alone could add millions of dollars every year in extra costs. Plus, because private parties can intervene and get paid to do so (up to $675 per hour), opponents say the burden of paying for the hearings would do more harm than good and would not counter any insurance savings. In fact, the costs would be passed on to the insurance companies and ultimately to the consumer. In essence, opponents believe it could result in even higher insurance premiums.

Affordable Care Act Rep. George Miller, an opponent of Prop 45, called the measure “wildly open-ended.” Physician’s groups including Kaiser, Blue Shield and many other healthcare giants are opposing this proposition and funneling millions into the No-on-45 campaign.

California Health and Human Services Secretary Diana Dooley said that Prop 45 would only serve to “throw a monkey wrench” in the efforts of Covered California and the Affordable Care Act.

It’s easy to see why Prop 45 is overlapping some of the issues that are already taken care of. It was actually written before the Affordable Care Act; however, it was not able to squeeze onto the 2012 ballot. But now that California has their own program in place that is fully equipped and compliant with the Affordable Care Act, it is widely believed that the measure only adds an unnecessary level of regulation on top of the current ones.

All in all, if the Affordable Care Act in California wasn’t successful in negotiations and implementations, Prop 45 might actually be in order. As it stands, though, Prop 45 is widely thought to only serve the interest of those promoting it and will ultimately cause undue harm and unnecessary expense.

Filed under: Prop 45 California, Resources, Obamacare, MBAA Education Center, Hospital Bill Review, Affordable Care Act

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2 responses to “The Effects of Proposition 45 on the Affordable Care Act”

  1. Esther says:

    How can I fight a bill from the hospital? The San Francisco General Hospital sent me a bill for $92,800, the Insurance paid $35,000 and we are responsible for $58,800, ( In addition to $4,000 from doctors and $3,700 ambulance) for less than 23 hours services.
    My 13 y/o son had a concussion and he was rushed to the hospital, which is the only one equipped for trauma. There is no choice in San Francisco, all traumas need to be treated at SFGH. It was an emergency life threatening situation.
    The Hospital had to sedate my son in order to get a CAT scan. The sedation was so strong that he needed to be attached to a breathing machine and put him in ICU. Once the CAT scan showed there was not internal bleeding I requested to remove the sedatives and breathing tubes. The hospital told me that they didn’t have enough staff on shift at night to do that so they kept my son attached to the breathing machine and feeding him sedatives for many hours after. The insurance claims that they already paid to maximum coverage, but we are responsible for the balance bill, which is the excess over the allowance amount, it appears that the maximum out of pokiest does not apply in this case, which is $16,000 for out of network and $7,100 for in network. I am just sleepless trying to figured out how to come with nearly $66,000, money that we don’t have. The hospital also said that if they don’t hear from us is taking us to the collection agency, HELP!!!!

    • says:

      Esther, thank you for reaching out! Please give us a call at 855-203-7058 so that we may assist.