Health Plan Oversight: Will That Be One Regulator, or Two?

California’s health plans have the pleasure of two regulators, whereas other states have to make do with one. If you are a “health service plan” (generally Health Maintenance Organizations and some other forms of health plan), you are regulated by the Department of Managed Health Care. If you write “disability insurance” (generally, not an HMO) you are regulated by the California Department of Insurance, along with the property & casualty, life, and other insurers.

(A health plan that issues different polices may have some regulated by DMHC and some by CDI. Just to show you how friendly and relevent it all is, my group health plan is an HSA-compatible high-deductible PPO issued by Anthem Blue Cross. I haven’t the slightest idea whether it is a “health service plan” or “disability insurance”, and I seriously doubt that I will ever take the trouble to find out).

As a result, whenever legislation affecting health insurance is introduced in Sacramento, it generally amends both the Health & Safety Code and the Insurance Code. Vast tracts of each code are almost identical to each other. So why do we need both?

Maybe we don’t, according to Republican Insurance Commissioner Steve Poizner. In remarks to the California Medical Association, Mr. Poizner called for one regulator. Which one shold prevail he did not say, but left the impression that he should be the head honcho. Indeed, he came off as somwehat unimpressed with DMHC’s failure to stop the alleged shenanigans of California health plans, especially those which write individual policies.

Actually, I cannot see much difference between the two regulators. The Departments have collaborated on a rampage against health plans who have been accused of so-called “post-claims underwriting”. However, there is a structural difference: The Insurance Commissioner is elected, while the governor appoints the DMHC Director.

Is there a difference in departmental behavior? Is an elected Commissioner more likely to be a populist crusader than an appointed Director would be? Would that result in actually harmful, so-called “consumer protection”? California appointed its Insurance Commissioner until 1990, when Democrat John Garamendi was the first elected one to fill the post.

Man, he was a doozy. Now Lieutenant-Governor, Mr. Garamendi wrote an inaccurate report in 2005 criticizing consumer-directed health care and carried on continuously about “putting people before profits”. He appears proud to have been called the “Golden Gorilla” who “went after” health plans.

Mr. Poizner is not in that league of ill-informed grandstanding. Nevertheless, the question of whether health plans should be regulated by an appointed or elected czar deserves exploration. My colleagues Lawrence J. McQuillan & Hovannes Abramyan’s U.S. Tort Liability Index 2008 argues that jurisdictions with appointed judges experience more responsible tort judgements than those with elected ones. Maybe the same is true for other agents of officialdom who re-distribute income and wealth, via health insurance regulation.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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