Looming Problems for Insurance in California

The author, the Republican candidate for insurance commissioner in 2014, sees numerous risks, especially for health insurance.

The dust is settling on the first round of Obamacare, but the radical changes to our insurance markets and healthcare are far from over. In the years ahead, the California insurance market runs the risk of having less competition, with fewer products and higher prices that shortchange consumers, unless we change direction soon. For a foreshadowing, look no further than Covered California, the health insurance exchange set up by the state to administer Affordable Care Act (ACA) plans. Covered California celebrated the news that 1.4 million Californians signed up for new health insurance plans through the exchange, but this number is likely vastly inflated, considering what will certainly be duplication in signups and customers who will default on their premiums. Covered California conveniently left out the fact that it canceled nearly a million plans even though the president himself - the Obama in Obamacare - told states they didn't need to cancel plans to be in compliance. The exchange’s decision left helpless consumers scrambling to find plans in the wake of the unnecessary and harmful decision. Nine million Californians might lose their plans next year when the ACA mandates affect employer-sponsored insurance. That number might even be higher. I won't see Covered California trample on these millions of families like it did with the million individual-market consumers. That's why I sued the exchange, to stop it from overstepping its authority and pulling the health insurance rug out from underneath a quarter of the state. My suit also takes dead aim at the reckless spending and waste at Covered California. The exchange infamously squandered nearly $1.4 million on a video of '80s fitness sideshow Richard Simmons prancing around on a stage with a contortionist in an attempt to reach out to millennials. I wish I was making this up, but I'm not. That $1.4 million is more than many Californians will make in a lifetime of work. The exchange, only four years old, already projects a $78 million deficit in 2015/16 and more than $30 million the next year. Politicians can't sit back and watch this happen. Without intervention, Covered California could come to the state’s general fund to bail it out or raise the monthly surcharge on health insurance plans so high that it will discourage people from buying insurance in the first place. Obamacare has valuable components, such as the coverage for pre-existing conditions, but under the costly and ineffective administration of Covered California it veers toward disaster. Meanwhile, attempts to amend California’s Medical Injury Compensation Reform Act, passed in 1975, could raise the liability limits for doctors. This would drive up insurance costs above even the inflated ACA-compliant plan costs and choke off the supply of medical care in the state, as doctors leave or limit the scope of their practices to manage their higher exposure. Even worse, a proposition on the ballot in California this fall would give the Department of Insurance (DOI) authority over increases in health insurance plan rates. This may sound good for consumers, but it's just the opposite.  As with any other product, it's competition - not government control - that drives down prices. Under this insurance commissioner, the DOI has hardly been the consumer's friend. The DOI already pressured Anthem Blue Cross, one of the state's largest health insurance providers, out of one critical state insurance market, leaving families with fewer choices to meet their healthcare needs. DOI is also slow to approve rate decreases that would benefit consumers. Rate decrease applications take between four and 12 months, leaving ratepayers hung out to dry while the bureaucratic process grinds on. Approvals of new products are slow to non-existent, meaning that Californians are robbed of advances that people in every other state use to protect themselves, their families and businesses, all while saving money. Putting this DOI in charge of health insurance would be a death blow to innovation and competition, leading to higher costs for everyone. This is a wild time in insurance in California, and Californians need an advocate fighting for them, now and in the future. With the right ideas and right leadership, California can enjoy a future every bit as great as its past.

Ted Gaines

Profile picture for user TedGaines

Ted Gaines

Ted Gaines is a state senator in California and the Republican candidate for insurance commissioner in November 2014. He serves as the chair of the Senate Republican Caucus, as well as vice chair of the Senate Insurance Committee. Ted served in the state assembly, where he was a member of the rules committee.

Read More