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Prop 45 Cheat Sheet: Regulating Health Insurance Rate Increases

Under Prop 45, the California Insurance Commissioner, currently Dave Jones, pictured above, would be given veto power over health insurance rate increases.
Under Prop 45, the California Insurance Commissioner, currently Dave Jones, pictured above, would be given veto power over health insurance rate increases. | Photo: Courtesy of California Department of Insurance
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This cheat sheet was published in tandem with a Prop 45 segment on KCET's "SoCal Connected." Watch it here or watch the full election special here.

Proposition 45 will appear on California's November 4, 2014, ballot.

If you thought Obamacare settled thing when it comes to health insurance, think again. Prop 45 has the potential to change the state-run healthcare marketplace, Covered California.

The initiative would make California the 36th state with the power to veto all rate increases to health insurance plans for individuals and small employer groups, those covering 50 or fewer employees, accounting for 16 percent of Californians. Covered California, for example, negotiates rates annually, but cannot stop health insurance companies from raising prices. Larger plans, which generally have greater leverage to negotiate rates with insurers, would not be affected by the measure in any way.

Under current law, the state reviews small group rate increases and makes information about them public. But it cannot veto them. This initiative would give the state insurance commissioner, an elected official, that authority. It would also mandate public notice and hearings for increases to make them transparent to consumers. The law would give insurers an explicit right to challenge denials to proposed rate increases in court.

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Not surprisingly, this initiative is the work of the same folks who wrote Prop 103, an initiative that required state approval for car insurance rate hikes. Since voters passed it in 1988, the measure is credited with saving consumers $100 billion dollars, according to a 2013 report.

The initiative doesn't require that Covered California have any additional duties, but it may require extra work that could lead to delays in approval for health plans offered in the exchange, according to state analysts.

And, despite the majority of attention drawn to the health insurance aspects of this ballot initiative, Prop 45 would also do away with first time buyer rate gouges based on whether consumers have bought health, auto, or homeowners insurance in the past, or have a weak credit record.

Prop 45 would not be funded by tax dollars. The estimated cost, borne by insurers, will be in the low millions of dollars a year.

Principal Supporters:
Consumer Watchdog
California Democratic Party
California Nurses Association
California Industrial Areas Foundation
California National Organization for Women
Consumer Attorneys of California
California Insurance Commissioner Dave Jones

Principal Opponents:
California Republican Party
California Chamber of Commerce
California Medical Association
California Hospital Association
California Orthopaedic Association

Key Points:
Gives the insurance commissioner, an elected official, the ability to veto small-group health insurance rate increases

Health insurance plans covering more than 51 or more people are exempt

Requires insurers to justify rate increases by way of a transparent process including public notice and hearings

Makes increases subject to judicial review

Denies health insurers the ability to set a rates based on someone's credit history or history of buying insurance

What Your Vote Means:
A YES vote means that the state insurance commissioner could deny small-group health insurance rate increases

A YES vote means that health insurers will not be permitted to charge rates based on a person's history of buying insurance, or their credit history

A YES vote means that public notice and hearings are given before rate increases take effect, and increases are subject to judicial review

A NO vote means that there will be no change to health insurers' ability to increase rates. Insurers will continue to be permitted to determine rates at will and charge people based on history of buying insurance or of poor credit

Click here for full text of the measure.

NOTE: The author of this post -- not the proponents of each measure -- selected the aforementioned key points for each ballot measure. They do not represent all of the provisions detailed in Proposition D and ordinances E and F, rather they are intended to offer the salient details.

NOTE: The author of this post -- not the proponents of each measure -- selected the aforementioned key points for each ballot measure. They do not represent all of the provisions detailed in Proposition 45, rather they are intended to offer the salient details.

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