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State hires consumer group to help it review healthcare rates

The hiring of Consumer Watchdog prompts the health insurance industry to complain that the state has enlisted a longtime nemesis to scrutinize rate hikes.

April 03, 2013|By Chad Terhune, Los Angeles Times
  • Insurance Commissioner Dave Jones, shown in 2011, defended his hiring of Consumer Watchdog. “It’s important to have the consumer perspective, but at the end of the day we make our own determination.”
Insurance Commissioner Dave Jones, shown in 2011, defended his hiring… (Katie Falkenberg, For The…)

California Insurance Commissioner Dave Jones lashed out Tuesday at another double-digit rate hike for thousands of small businesses getting their health insurance from industry giant Anthem Blue Cross.

But this time Jones got some help from a surprising source. He has quietly tapped Consumer Watchdog, his political ally and the state's most outspoken industry critic, to help review health insurance rate increases under a one-year contract worth as much as $88,000.

The insurance industry expressed dismay that the state enlisted its longtime nemesis to help review rate increases, and some experts questioned whether it's necessary to further antagonize insurers at a time when state officials are trying to work closely with the industry to implement a massive healthcare expansion.

Public-policy experts also scoffed at the arrangement.

"Their very aggressive stance against insurance companies raises serious questions about a conflict of interest," said Jessica Levinson, a Loyola Law School professor and expert on government ethics. "You want an independent researcher."

Patrick Johnston, president of the insurance trade group California Assn. of Health Plans, said, "Any review of health plan rates should be conducted by independent, impartial consumer groups that do not have political conflicts of interest and financial motivations."

Consumer Watchdog was hired to supplement the state Insurance Department's own review of rates.

In its first report Tuesday, the Santa Monica group accused Anthem of padding its profits and overcharging small-business customers by about $17 million. Jones echoed that theme at a Sacramento news conference, but he didn't mention Consumer Watchdog's new role.

Jones criticized Anthem Blue Cross for raising rates on about 7,000 small businesses as much as 23% and said the company rejected his request for lower rates. Anthem said its average rate increase of nearly 11% for these 45,000 employees and their dependents was necessary to cover rising medical costs.

Later in an interview, Jones defended using grant money from the federal healthcare law to hire Consumer Watchdog.

"I think it's important to have the consumer perspective, but at the end of the day we make our own determination," Jones said. "This grant funding is a drop in the bucket compared to the hundreds of millions of dollars health insurers and HMOs have on their side. I think ordinary Californians know the deck is stacked against them."

Jamie Court, president of Consumer Watchdog, said the group's proven track record in challenging insurance company practices made it an ideal choice for the state. Consumer Watchdog says it has saved Californians $2.3 billion since 2003 by successfully disputing rate hikes for property and casualty insurance under Proposition 103, the 1988 ballot measure the group championed.

"We are the foremost expert on health insurance rates," Court said. "This grant allows us to pull back the curtain and show how the wizards at Anthem and other companies are manipulating Oz. We want to prove that rates are too high."

That approach by Consumer Watchdog troubled some observers.

"It's like asking one of the Dodgers to umpire a big game for the San Francisco Giants," said Dan Schnur, director of the Jesse M. Unruh Institute of Politics at USC. "Consumer Watchdog is a very well-respected organization, but the commissioner is clearly going out of his way to predetermine the outcome."

Consumer Watchdog has sparred with health insurers for years, often suing them on behalf of patients who felt they were improperly denied benefits. In the last year, Jones and Consumer Watchdog worked together to put an initiative on the November 2014 ballot that would give the insurance commissioner the authority to deny health insurance rate increases.

Under current law, Jones has only the power of the pulpit. He can publicly declare an increase unreasonable, but he has no power to stop the insurer from imposing it.

"Without reasonable controls on these rate hikes, families will be priced out of the health insurance market," Jones said.

In an effort to change the law, Jones has worked closely with Consumer Watchdog. Last spring, in a much publicized event, Jones joined Consumer Watchdog founder Harvey Rosenfield to drop off boxes of voter signatures at a local elections office to place the measure on the ballot.

The measure seeks to give the Insurance Department the same rate-setting authority over health insurance that it already holds over auto and property coverage. Insurers, medical providers and other business groups oppose the measure on the grounds it would create a costly new bureaucracy and that it doesn't address the underlying reasons for rising premiums.

Meantime, under the current rules, Consumer Watchdog said it plans to review three other rate filings this year. Court said his group will primarily bill for work done by an outside actuary.

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