Covered CA Has Insurance Companies Covered, Not Consumers

Covered California’s announced 13% rate hike for health insurance rates in 2017 is going to hit consumers hard.  It’s a double whammy since California policyholders have suffered from some of the narrowest networks of doctors and hospitals in the country, allegedly as the price paid for modest premium hikes the last couple of years. Now Californians have fewer choices of doctors – less than 25% of an area’s docs in most plans – and higher premiums: the worst of all worlds.
 
The real issue is that it’s very hard, even if Covered CA wanted to, to negotiate with the three health insurance companies that control 90% of Covered California’s market.  That’s why Consumer Watchdog put Prop 45 on the ballot in 2014 to give the state’s insurance commissioner the power to approve or reject health insurance rate hikes, rather than just have to accept them.  Covered CA worked with the insurance industry to stop the rate regulation, claiming it would interfere with its “negotiating.”
 
That was hog wash, but what we learned was just how tight the agency was with the health insurance companies.  The top Covered CA peeps who “negotiated” with the insurance companies came and went right from the companies’ ranks. The revolving door meant consumers had no voice. 
 
Insurance companies spent $57 million to kill Prop 45’s rate regulation in the lowest-turnout general election in history and the initiative still got 41%.   The rate hikes announced today would never have gone into effect had the hammer of rate regulation been in place because the insurance commissioner would not have allowed it given the profits of the companies.
 
Then came Covered California Chief Peter Lee’s big “Ah Ha!” moment.  He weighed in in the Wall Street for the mega-merger of Anthem and CIGNA, which has been opposed by consumer advocates, medical associations and all the little guys in the system.   Today, as justice would have it, news broke that the US Justice Department is opposing the merger, which is very likely to scuttle the deal.
 
The question that has to be asked of Lee: Why would a government entity that negotiates with insurance companies for consumers want fewer insurance companies to negotiate it?
 
Sure, CIGNA is not in Covered CA currently, but it could be in the future, has wanted to be in the past (but was denied entry) and is a critical player for competitiveness in the employer market. 
 
Why would anyone on consumers’ wide want less competition?
 
Today we have an answer.  Lee and Covered CA, who claimed insurance companies could be trusted without the lever of rate regulation, had only this to say for consumers: "Shop Around."   In insurance-speak, that's, "Screw You," since there are only three big companies, they are all raising rates, and leaving your plan usually means losing your doctor.
 
The Legislature needs to take another look at rate regulation, especially since its leadership has changed since the last look. These double digit rate hikes should be a wakeup call that insurance companies cannot be trusted and neither can Covered California. 

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