Regulating Insurance…

Although its not intuitive and oftentimes confusing for California consumers, oversight of health coverage is divided between the California Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI), which have unique statutory histories, administrative structures, and legal frameworks.

This unique California regulatory structure is the focus of a new report, Ready for Reform? Health Insurance Regulation in California Under the ACA, prepared for the California HealthCare Foundation (CHCF) by Kelch Associates. (I participated on a recent panel, that was reported on by the LA Times, that discussed the report and health insurance regulation in California and the policies, structures, and new responsibilities needed to implement the ACA.)

The report states that there are few defenders of California’s two-regulator system. That certainly includes consumer groups like Health Access California, which has supported a unified regulator for years. It’s not good for consumers to know who they should complain to (even if the two regulators work to refer patients to one another). And it’s not good for the regulator to only have detailed information about part of the market. It’s never good to have insurers be able to choose their regulator, and go “forum shopping,” based on which has more leniant rules or more aggressive oversight.
That said, there’s a lot in our health system that is indefensible. While there are areas where California has exhibited leadership in consumer protection–independent medical review, timely access, language access, etc.–but there are other aspects of our insurance market which resemble the wild, wild West, from denials for pre-existing conditions to “junk” insurance that still leaves people in debt. That’s why there has been a longstanding push for reform in California, and why, despite all the barriers, the Affordable Care Act passed.
And that’s the historic opportunity of the moment–the implementation of the new federal law over the next few months and years. In order to both implement and improve the Affordable Care Act, the task is California needs to:
* Upgrade our existing laws, standards to meet both the letter and the spirit of the law.
* How do we prevent insurers from gaming the market between now and 2014, and
* How do we manage a smooth transition into 2014?
* Even after 2014, how do we really transition the market to one where there is robust competition on price, benefits, quality, and customer service, rather than risk selection?
There’s a fair question about whether an integration in 2012 and 2013 would assist or distract from the work to implement the ACA by 2014. There are some changes that have to happen anyway. Either way, California should have an explicit effort and policy, in all the work to get ready for 2014, to align mission, goals, standards, practices, systems, definitions, regulations, etc., of the two regulators so that a consolidation is best facilitated.
When this issue has come up, the issue that everybody immediately gravitates to is about overall authority and governance: Department of Managed Health Care, or Department of Insurance? But the politics around that question has stymied the significant work to better align the law and process and standards accordingly. We have that opportunity with the Affordable Care Act. We appreciate the report for spelling out the complexity and nuance of the task before us.

In this debate, it’s actually more important that we bring benefit standards up to federal standards, that we have a robust consumer complaint and assistance program, that we are vigilant in preventing the gaming of the market leading up to 2014 and beyond, including by ensuring consistent interpretations of federal law.
We appreciate that departments and regulations can be remade. The Department of Managed Health Care was born as a stand-alone patient protection agency when the HMO Patients Bill of Rights was passed and health regulation was taken out of the aptly-named Department of Corporations over ten years ago, and it made a big difference from handling consumer complaints to ensuring essential benefits and access to care. In just the past year, we see the Department of Insurance making its own changes under Commissioner Jones, creating a new deputy commissioner for health care, a recognition that health coverage is not just another insurance product, and bringing their rate review expertise into the health field for the first time under new authority by the ACA.

Consolidation is a goal, but not the main one: there certainly are variations of a single agency that we would oppose as worse for consumers. But working toward consolidation is essential as part of the goal of strong consumer protections and a consumer-friendly market.

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