California Insurance Commissioner Dave Jones has spent much of the past decade looking to enact rate regulations on the health insurance industry, first as an Assemblymember and now as the state’s top insurance regulator. We sat down with him recently to talk about Proposition 45, a November ballot measure he supports that would give him the power to reject health insurance rate hikes.

The biggest insurance issue in California right now is Proposition 45, the ballot measure for November that would grant your office the power to reject what you deem to be excessive health insurance rate hikes. We’ll get to the opposition arguments in a moment, but first tell me why you think it’s so critical for your office to have this power.

California’s residents and businesses have suffered double-digit increases each year for the last 10. For families, rates on average have gone up 185 percent. That is several orders of magnitude greater than the rate of inflation and one of the leading causes of bankruptcy. So I’m frustrated because it’s had a huge impact on business and family budgets, and unfortunately I have no power to do anything about it. We’re actually behind the curve compared to 35 other states that have given their insurance commissioner the authority to reject excessive health insurance and HMO rate hikes. And even though we’re successfully implementing the Affordable Care Act here in California, there’s nothing in that law to give anyone the authority to reject excessive insurance rate hikes.

Opponents question Prop. 45 on several fronts. First, many health insurers contend consumers already have a wide breadth of protections granted by the Affordable Care Act, including a process to review premium rate hikes. Why are those not enough?

Review power is very different than having authority to say no. We have review authority, and my department and the Department of Managed Health Care use that authority to reach conclusions about whether rates are excessive. We have done that, and then the health insurers go ahead and charge those rates anyway. I’ll give you an example. I caught Anthem Blue Cross two years ago including in their rate for small businesses the collection of the Affordable Care Act tax 18 months before they had to pay that tax to the federal government. I know why Anthem Blue Cross was doing it — they want to collect that money and earn a return on it before they pay it to the federal government. But why should small businesses have to pay that tax 18 months in advance? So we asked Anthem Blue Cross to refrain from collecting that tax, and they told us to go pound sand. That’s one of numerous examples of where we’ve concluded that rates are excessive. We’ve told the carriers this and they’ve gone ahead and collected the rate anyway.

Covered California, the state health benefits exchange, has also been critical, contending Prop. 45 will interfere with its ability to negotiate prices with health insurers. Most observers also contend that our exchange is more robust in negotiating rates than in any other state. Given all that, why not give it more time to see if their process can actually keep rates at bay?

In theory, Covered California would have sufficient bargaining power to get better deals from the health insurers. What’s actually happening is very different. Over 93 percent of the individual market policies sold through Covered California are sold by just four carriers: Anthem Blue Cross of California, Blue Shield of California, Health Net and Kaiser. You simply don’t have any bargaining power when your bargaining partner controls 93 percent of the market.

But can’t they also kick insurers out of the market if their rates are excessive?

Again, in theory, yes they could. But that hasn’t been the reality either. Why? Because Covered California needs to have every health insurer they can get in the market. Remember, we’ve actually seen a decline in the number of health insurers selling in Covered California. We started with 13, then last year it was 11 and now we’re down to 10. And out of those 10, only the four I mentioned are even close to being statewide. And even those four aren’t in every place in the state. There are some places in California where you can only find one health insurer selling through Covered California. So Covered California simply does not have the ability to say to a carrier, look you’re charging too much, we’re going to throw you out. I’ll give you an example. Because of the tax issue I spoke of earlier, I made a formal recommendation to Covered California to exclude Anthem Blue Cross of California from the small employer part of the exchange, and Covered California declined. Why? Because they can’t afford to turn any health insurers away. So the theory that Covered California would have this bargaining power has just not turned out to be the case.

Aren’t many of the people who experienced the major rate hikes you talk about also eligible for federal subsidies to offset those costs?

If you have a low enough income and you’re purchasing through Covered California, you get a premium subsidy. That’s wonderful for you. But if you are not eligible for that premium subsidy, you got a rate increase in 2014. So while these are great theories about how Covered California could get better rates, in practice it didn’t work that way. Covered California also only covers about one-quarter of the overall rise in the individual small-employer market. So even if they were able to get a better rate, you still have everybody else and all the small businesses outside the exchange. Three-quarters of that market is not getting any of this alleged benefit. So for all of these reasons, in state after state it’s been demonstrated that you need rate regulation. We have 25 years of evidence to support this, with auto insurance, homeowners insurance, property insurance and casualty insurance. Remember that in 1988 the voters enacted Proposition 103, giving the insurance commissioner the authority to regulate rates for all these other insurance product lines, and it’s worked very well. Consumers and businesses have in fact saved over $100 billion in rates they would otherwise have had to pay.

Opponents also question whether it’s a good idea to place so much power in the hands of just one person. The Legislature has previously considered using a commission for this. Why not go that route instead?

I think our experience with Prop. 103 demonstrates that having a directly accountable, directly elected official responsible for this works well. A commission of faceless bureaucrats who are beholden to gosh knows whom, I don’t think is a better alternative. That said, it’s not just the commissioner, it’s the entire department. There is due process. There’s opportunity for public comment. That system of checks and balances with the authority of the individual being accountable directly to the voters has worked very well.

You’ve noted that young adults have been hit the hardest by skyrocketing rates, something that is actually built into the ACA’s structure. Does this power offer you any ability to deal with that issue?

Yes, because a rate reduction benefits everybody that is paying that rate. Some may benefit more than others because, as you point out, the ACA allows carriers to charge those who are older no more than three times the amount they charge younger people. But any rate reduction would be spread across all of those populations, and everyone can benefit from it. Prop. 45 also allows the commissioner to reject excessive rate hikes on small businesses, which are the most vulnerable after families and individuals in their negotiations with insurers because there really is no negotiation. Basically, small businesses have to take the rate that’s given to them or leave it. That’s an untenable situation for many small businesses that would like to provide health insurance for their employees but simply can’t afford to do it because the rates keep climbing out of their reach.