Bloomberg News

WellPoint Leads $13 Million Battle on California Insurance Rates

April 07, 2014

WellPoint Inc. (WLP:US), the second-largest U.S. health insurer, is leading companies that have poured $13.4 million into defeating a ballot initiative that would give California regulators the power to reject increases in health policy premiums.

WellPoint, based in Indianapolis, gave $12.5 million and its Anthem Blue Cross unit gave $270,000 through April 2 to defeat the measure, according to data provided by MapLight, a Berkeley-based nonpartisan research organization. Oakland, California-based Kaiser Foundation Health Plan Inc. also gave $270,000. Supporters, led by Santa Monica-based Consumer Watchdog, have raised $425,521.

Health insurers stand to lose control over raising rates in the most populous U.S. state at a time of dramatic growth in the customer base. More than 1.2 million people have enrolled in private health insurance plans under Obamacare through the end of March, according to Covered California, the state’s health-insurance exchange.

“The bottom line is they want to continue to protect their excessive profits and their ability to set rates as they see fit,” said Dave Jones, California’s insurance commissioner, who is a Democrat and supports the ballot measure.

Premiums for family medical coverage in California increased by 185 percent since 2002, with average monthly premiums for single coverage at $572 in 2013, compared with $490 nationally, according to a report released in January by the California HealthCare Foundation, an Oakland-based nonprofit group.

Justify Rates

The ballot initiative would require insurers to disclose publicly and justify proposed rate changes and give the state insurance commissioner authority to reject increases. It would apply to every plan that covers individual and small-group policy holders.

California voters in 1988 approved a ballot measure that gave the state insurance department the power to regulate rate changes for auto, property and casualty insurance.

About 35 states have the authority to approve or deny rate changes, according to the National Association of Insurance Commissioners.

Darrel Ng, a spokesman for WellPoint and Anthem, and Amy Thoma, a spokeswoman for Kaiser, declined to comment on the spending and referred questions to Robin Swanson, a spokeswoman for Californians Against Higher Health Care Costs, based in Sacramento.

“This initiative creates a costly new bureaucracy that will be headed by a single elected politician who then has broad new powers over health care, including treatment options health insurance covers,” Swanson said. “Treatment decisions should be made by doctors and patients, not someone with a political agenda.”

The California Medical Association is part of the group that opposes the initiative.

‘Special Interests’

“California just launched a new independent commission empowered to negotiate health-plan benefits,” association President Richard Thorp said in an e-mailed statement, referring to Covered California. “We should allow them to do their job instead of passing a law that hands authority over health-care coverage to a politician who can take campaign contributions from special interests.”

Jones said Covered California doesn’t oversee premium changes.

“That’s simply not true and an intentional misstatement of how the law works,” he said. “Covered California is governed by a board which negotiates rates. There’s no regulation of rates by Covered California or any committee of Covered California.”

The change is being sought as the Obama administration implements the 2010 Patient Protection and Affordable Care Act. As of March 31, more than 3 million Californians enrolled in health-insurance plans or in Medi-Cal, the state’s health coverage for the poor, according to Covered California.

Early Lead

The $13.4 million already in the insurance industry’s campaign fund comes with seven months to go before the November election.

“It is unusual to have such substantial donations this early in the election process,” said Daniel G. Newman, MapLight’s president. “It shows what’s at stake financially for those insurers and also what’s at stake financially for health-insurance consumers.”

In addition to WellPoint, Anthem and Kaiser, Blue Shield of California contributed $180,000 to oppose the measure and Health Net Inc. (HNT:US) gave $135,000, according to MapLight, citing 2013-2014 election cycle data from the California Secretary of State. The California Association of Health Plans and UnitedHealth Group Inc. (UNH:US)’s United Healthcare unit each gave $30,000.

The largest support for the measure has come from Consumer Watchdog, at $250,000; the Committee for Corporate Accountability and Consumer Protection, $105,000, and the California Nurses Association, $50,000, according to the data.

Funding Disparities

Measures with similar funding disparities have failed in recent years. In 2012, California voters rejected a proposal to raise cigarette taxes by $1 to fund cancer research that received $12.9 million in support from the American Cancer Society and other groups, while the opposition gave $47.8 million, led by Altria Group Inc. (MO:US) and Reynolds American Inc. (RAI:US), according to MapLight data.

The financial advantage will give the measure’s opponents the ability to run more television and radio advertisements and send out more mailers to sway voters, Newman said.

“This battle will be a David and Goliath fight,” said Carmen Balber, Consumer Watchdog’s executive director. “California voters are smart, and it raises red flags to the public when an industry spends overwhelmingly in opposition to something.”

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Pete Young, Jeffrey Taylor


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Companies Mentioned

  • WLP
    (WellPoint Inc)
    • $115.57 USD
    • 0.58
    • 0.5%
  • HNT
    (Health Net Inc/CA)
    • $45.76 USD
    • 0.69
    • 1.51%
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