Is California now a deep blue state in which moderate conservatives no longer have a chance of victory in statewide elections? Or do such candidates still have hopes if they pass on the two-party system and run as independents apart from the partisan fray?

The former theory has been the topic of recent stories in the national media. But it’s the latter view driving the candidacy of tech entrepreneur Steve Poizner, who was elected California insurance commissioner in 2006 as a Republican and is seeking a second term this year while running as an independent. (Incumbent Dave Jones is termed-out and is running for attorney general.)

Poizner, a resident of Los Gatos in Silicon Valley, is a lock to advance past the June 5 primary to a November general election race against state Sen. Ricardo Lara, D-Bell Gardens. The other two candidates in the race have little name recognition and are lacking in institutional support.

But a Poizner win would seem to be a long-shot in the general election, based on 2014’s results. That year, several Republican candidates ran for statewide office with plausible claims to Arnold Schwarzenegger-style moderate conservatism. Since they were not going up against incumbents, two of these candidates – Fresno Mayor Ashley Swearengin, who ran for controller, and Pepperdine University administrator and civic activist Pete Peterson, who ran for secretary of state – were thought to have decent chances. Both lost by at least 500,000 votes.

Yet Poizner has factors in his favor that those 2014 GOP candidates didn’t.

The first is Lara’s struggle to define the campaign on his terms. Since Poizner got generally good marks as insurance commissioner for balancing the interests of consumers and insurers, Lara has focused on Poizner’s strong anti-undocumented immigrant positions in 2010, when he sought the Republican gubernatorial nomination but lost to former Hewlett-Packard CEO Meg Whitman. Poizner now disavows those positions. In endorsing Poizner, the editorial boards of the Sacramento Bee, the San Jose Mercury-News and the San Francisco Chronicle focused instead on Poizner’s readiness to deal with such difficult insurance issues as autonomous vehicles and increasing wildfire risks.

Meanwhile, the “issues page” of Lara’s own campaign website lists nine topics, including transportation and criminal justice – but not insurance. It appears designed for a gubernatorial candidate. Poizner’s website focuses primarily on his dealings with insurers in his previous term and his endorsements.

Lara’s history as co-sponsor of Senate Bill 562 – which would commit the state government to adopting a single-payer health care system – is also proving a double-edged sword. His high-profile support of the proposal has won raves from the California Nurses Association and progressive Democrats.

But SB562, which passed the Senate last summer before stalling in the Assembly, has faced a backlash from across the ideological spectrum for being vague and incomplete. The measure’s language doesn’t specify how its estimated $400 billion annual tab would be covered; how it could overcome a California Constitution provision blocking sharp increases in state spending; and how it would be able to divert federal health dollars for unprecedented use on a single state’s unique program.

Poizner campaign literature suggests questions about the cost of SB562 will be a focus of his fall campaign ads.

Should high-risk homes get insurance protection?

Lara’s similarly populist position on wildfire costs may also play better with progressives than with voters in general. He has proposed legislation to make it more difficult for insurers to consider recent fires when setting rates and deciding on whether to offer coverage in high-risk wilderness areas.

This has won praise from officials and homeowners in rural counties. But the measure has also faced criticism from insurers, who say if Lara’s proposal is enacted, millions of homeowners in low-risk areas would have to subsidize the rates of those in wilderness zones.

Still, Lara has a conventional but potent ace in the hole: his ability to run a fall campaign ad blitz reminding Californians of Poizner’s history as a Republican in a state with a dwindling number of Republicans. The latest state registration data show only one-quarter of voters identify with the GOP – a record low.

A Probolsky Research poll from last month put Poizner ahead of Lara. But most of those surveyed were undecided or didn’t want to take any position.

For instance, the California Supreme Court issued a Jan. 23 ruling in a case that challenged the insurance commissioner’s authority to issue rules governing how insurance companies calculate replacement-cost estimates for homeowners’ policies. The trial and appeals courts ruled the commissioner exerted power not granted to him by the Legislature, but the high court overruled those decisions.

The decision has broad implications for the California Department of Insurance, which has been granted vast new regulatory powers. And while the 1959 statute at issue relates solely to the insurance industry, the court’s opinion could embolden other California regulatory agencies to take wider latitude as they implement business-related regulations.

The regulation in question was promulgated in 2010 under former Insurance Commissioner Steve Poizner, a Republican, and defended by the current commissioner, Dave Jones, a Democrat. Following wildfires in the 2000s, some homeowners complained their policies did not provide enough coverage to cover the total cost of rebuilding. They argued the insurers’ replacement-cost estimates, which they relied upon in their coverage purchases, often excluded major items like debris removal that should have been factored into the calculation.

The resulting “replacement cost regulation” requires insurance companies that choose to provide replacement-cost estimates to include a detailed list of requirements and standards that must be followed before communicating any such estimate. Those that provide estimates that diverge from the standard would be deemed to have provided a “misleading” statement – a serious matter under the state’s Unfair Insurance Practices Act.

In a brief submitted to the court by two trade associations, the insurance industry argued the commissioner “attempted to run roughshod” over the authority granted by that 1959 law by “expanding the legislatively prescribed list of unfair or deceptive acts spelled out in the UIPA.” The industry further argued the insurance code doesn’t allow the commissioner to mandate only one type of replacement estimate and that restrictions on communicating other types of cost estimates would abridge the First Amendment.

The lower courts ruled in favor of the industry on the “limits of power” issue, so the courts never examined the legal issues surrounding those other points. The state attorney general’s office took the side of the state Department of Insurance. In its 2015 ruling, the appeals court noted that, while the Legislature could “regulate the form and content of replacement cost estimates” if it wanted to, “the UIPA has not as of yet given the commissioner authority to regulate the content and format of replacement cost estimates.”

The state Supreme Court, however, found that neither “the UIPA nor any other statute categorically limits the commissioner’s authority to issue the regulation. On the contrary: section 790.10 explicitly vests in the commissioner authority to issue ‘reasonable rules and regulations’ to administer the UIPA. Which is what the commissioner sought to do here.”

The industry groups that were party to the case obviously disagreed with the court’s opinion with leaders of the Association of California Insurance Companies and the Personal Insurance Federation of California noting in a short statement their belief that “it does not accurately reflect the Legislature’s intent.”

While this case dealt with the relatively obscure issue of underinsurance — i.e., when consumers have too little insurance to meet their needs — the ruling’s implications are potentially quite broad. The term “reasonable rules and regulations” could be taken to mean that an insurance commissioner — and perhaps leaders of other regulatory agencies — is free to delve into lawmaking. Future regulators could use that broad rubric essentially to write vast new regulations and impose them on businesses. That’s certainly how Jones appears to be taking it, with his office writing in a Jan. 23 statement that “the Supreme Court ruled the insurance commissioner has broad discretion to adopt rules and regulations as necessary to promote the public welfare.”

Under our system of government, legislatures are the proper place to write laws, which are then implemented by the administrative agencies. Should insurers be compelled to provide more coverage than the policyholders purchased? What responsibility do policyholders have in assuring they purchase the right amounts of coverage? There are various remedies for these problems in the marketplace and via the legislative process. The long-term result of this case, however, is to allow an insurance commissioner to try to fix the problem with a regulatory edict.

The Supreme Court left open the opportunity for insurers to challenge the decision on other grounds and the insurers are mulling their options. But the ruling clearly gives insurance commissioners broader discretion than before in crafting and implementing regulations. 

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

California Insurance Commissioner Dave Jones

“Yesterday, Consumer Watchdog issued a news release about State Farm that includes inaccurate statements and is misleading,” according to an Aug. 10 Department of Insurance statement. “Commissioner (Dave) Jones requests Consumer Watchdog retract its false and misleading news release and respect the Proposition 103 rate setting process in this case.”

In response, Consumer Watchdog defended its news release and issued a short clarification on its website. The matter centers on the arcane nature of California’s byzantine insurance-regulatory system, which empowers the elected insurance commissioner to approve or deny any insurance company’s proposed rate changes.

Before voters approved Prop. 103 in 1988, insurance companies had much more freedom to set their rates and structure their products based on whatever factors they thought were most important. The department enforced some regulations, including making sure that rates weren’t either excessive or insufficient to provide the resources needed to pay any future claims. Consumers could pick and choose among various companies if they didn’t like the price or the terms the company offered.

Prop. 103, however, established limited criteria upon which companies could establish their automobile, homeowners’ and casualty insurance rates. When a company wanted to raise rates, the Department of Insurance would hold hearings and an administrative law judge employed by the agency would issue an order granting, amending or rejecting the request.

Consumer Watchdog’s founder and current legal counsel, Harvey Rosenfeld, was the author of Prop. 103. The measure established the new rate restrictions. It also “authorized a process for consumer participation in the administrative process for setting insurance rates, and permitted consumer ‘intervenors’ to recover advocacy and witness fees and expenses under certain circumstances,” according to the Department of Insurance website.

Consumer Watchdog has since become California’s most prominent “intervenor.” It routinely challenges industry rate requests. In the case at issue, Consumer Watchdog opposed State Farm’s effort to increase rates by 7 percent. The company cited the ongoing drought and the company’s vulnerability to wildfires as justification for the hikes, whereas the consumer group has accused it of overcharging its customers.

Instead of granting the hike, Administrative Law Judge John H. Larsen “ordered” a 5.37 percent decrease for non-tenant homeowners rates, a 20.39 percent decrease for renters’ rates and a 13.81 percent decrease for State Farm’s condominium insurance lines. The rate reductions were ordered retroactively to July 15, 2015, and State Farm was told to pay a 10 percent annual interest rate as part of its refunds, which are expected to total around $85 million.

The Department of Insurance accuses Consumer Watchdog of confusing “consumers and the media into believing that consumers are now entitled to a rate rebate and reduction, when no such order has been issued. … Commissioner Jones has the final authority in the case and will make a final decision at the conclusion of the case, which is still pending.”

Consumer Watchdog agrees that Jones “must decide whether to approve the judge’s decision” and says its news release explains as much. The group links to the judge’s order – and its President Jamie Courts notes that it is titled as an “order.” The dispute centers on timing: the department thinks the consumer group depicted the decision as final, even though Jones has yet to finalize it.

This may be a dispute over who gets the main credit for a rollback. Or it might be an effort by the department to avoid any appearance of a pre-ordained conclusion. Critics have long argued the department works closely with “intervenors.” Administrative law judges are not actually part of the judicial branch, but instead are employees of the agency. They cannot be expected to rule with true impartiality. By chastening Consumer Watchdog, the commissioner may be trying to make clear this is not a proceeding in a kangaroo court.

If Jones ultimately approves the rate rollback, State Farm can still challenge the matter in the (real) court system. If so, the company will have a solid argument. It’s one thing for state regulators to approve or deny proposed rate increases. But it’s quite another for them to order a retroactive rollback of a previously approved rate structure, which would create a precedent that should concern all of the state’s insurance companies.

Of course, Prop. 103 did call for a 20 percent rate rollback – but that portion of the measure was rewritten by the courts. Eventually, the courts upheld a rollback formula for one-time rebates and now is arguing this old rebate case gives them power to order rebates on new rate filings governed under a different section of Prop. 103. That would set precedent. If Larsen’s ruling stands, the industry is bound to wonder how it can determine what rates to set if, years from now, the agency can decide to simply go back in time and mandate massive rebates. Imagine if the state could do that to, say, retailers, restaurateurs or car dealerships.

While the dispute between the department and Consumer Watchdog centers on the ephemeral nature of a news release, the underlying issue could have deep ramifications for the long-term viability of insurance companies that do business in our state.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

This “solvency” issue gives state commissioners broad authority. In the dozen or so states where insurance commissioners are elected, these officials often have their eyes on higher office. For instance, insurance officials and some Sacramento observers argue California’s ambitious commissioner – Dave Jones, a former Democratic assemblyman who is mulling a race for attorney general – is imposing a politically motivated diktat on companies and dressing it up as a campaign for solvency.

The issue: Jones is calling for insurance companies to divest “voluntarily” from their investments in thermal-coal companies and in utility companies that make heavy use of coal. He has vowed to publicize – some say “shame” – insurance companies that don’t comply with the request. Given that 1988’s Proposition 103 grants the California commissioner vast powers to prescribe which factors companies use to adjust rates and to approve or deny proposed rate increases, insurance officials wonder about the voluntary nature of the policy.

The “Climate Risk Carbon Initiative” divestment request applies to direct investments in companies that gain more than 30 percent of their revenues from thermal coal. In practice, these are some of the most conservative investments around, including monopoly utilities whose returns are set by regulation. It also requires insurance companies that do business in the state to answer a variety of questions about such investments, even if they are headquartered outside California. The goal is to pressure companies to divest from these holdings.

“The commissioner decided to request voluntary divestment from thermal coal enterprises this year following consideration of recent studies that show coal investments represent significantly higher financial risk than other investments over time,” the California Department of Insurance explains. “Moreover, since 2011, coal prices, cash flows, and company valuations have fallen sharply, thus adversely affecting and bankrupting numerous coal companies.”

“Politics,” the department says, “has nothing to do with the decision to ask insurers to divest from thermal coal.”

That sounds reasonable, but insurers typically make conservative investment decisions. Jones and other advocates for divestment make it seem as if these companies are heavily invested in high-risk stocks. They suggest these companies will be stuck with enormous “stranded assets” as the nation moves away from coal-based energy and toward alternative-energy sources. But insurance companies hold few coal-related stocks and bonds as a percentage of their overall investments. Even if the “stranded asset” argument were correct, it would barely cause a blip in their portfolios.

In a letter to the insurance commissioner last year, leaders of major insurance-company trade associations reminded him: “For regulated utilities, the risk of loss due to stranded assets is remote. Utility companies operate on a cost-plus system. Precedent is in place that supports the recovery of all costs deemed to have been prudently incurred.”

By contrast, some of the investments the insurance commissioner prefers – in “green” energy, for instance – are risky. As my R Street Institute colleague R.J. Lehmann noted in an article last year, “Greentech Media publishes an annual list of solar company failures and has noted that ‘(k)eeping track of failing solar companies in 2011 and 2012 bordered on full-time work.’”

Why hasn’t the insurance commissioner called for divestment from these companies?

The answer seems obvious. California’s government has embraced climate change in a big way. Gov. Jerry Brown has addressed the United Nations and a conference at the Vatican, where he has depicted the issue in stark terms. In his view, the future of human existence is at stake. California has passed a first-in-the-nation cap-and-trade system to roll back industrial emissions to 1990 levels, along with other legislation designed to decrease public use of petroleum products dramatically. It’s a popular cause here, and isn’t lost on any up-and-coming politician.

Whatever one’s view of man-made climate change, it remains an iffy proposition to suggest it is threatening the long-term solvency of major insurance companies. These investments already reflect the risks involved in the energy sector. Every knowledgeable investor knows about the changing regulatory climate. Private investors are better able than government planners to evaluate such matters and make decisions accordingly.

Indeed, as I pointed out in my recent R Street study, one of the nation’s most widely respected investors, Warren Buffett, recently rejected calls by an activist group and investor in his Berkshire Hathaway Corp. to report on climate-change risks. For instance, many activists argue that insurance companies aren’t properly pricing these risks and aren’t being aggressive enough in tackling the potential long-term problems. Buffett believes in climate change but doesn’t see a risk in his company’s insurance holdings.

“As a citizen, you may understandably find climate change keeping you up nights,” Buffett said in his company report. “As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.” Buffett suggested even an uptick in the frequency or severity of climate-related catastrophes wasn’t much of a problem for the insurance industry, given that rates are set annually. Moreover, as a major provider of reinsurance – that is, insurance for insurance companies – Berkshire might actually benefit from more demand driven by climate change, given that reinsurance prices have been falling for years.

These companies’ futures depend on their ability to evaluate risks and benefits. They all have teams of actuaries and risk-management professionals who have a vested interest in making the most sophisticated guesses about future events. Elected officials, by contrast, are more apt to be swayed by political winds. A previous Republican insurance commissioner and gubernatorial candidate, Steve Poizner, in 2010 tried to force insurers to divest from investments in multinational companies that did business in Iran. This type of thing is nothing new.

“Divestment comes at the expense of meaningful action,” wrote Frank A. Wolak, director of the Stanford University Program on Energy and Sustainable Development. “It will do nothing to reduce global greenhouse emissions. It will not prevent these companies from raising capital.” And indeed, the state government’s push for divestment in non-insurance areas – i.e., forcing the California Public Employees’ Retirement System to take a similar approach – has been met with a similar backlash.

One can never know the motives of insurance commissioners, past or present. But it’s a safe bet that private investors making their own decisions with their own money are almost certainly more trustworthy than politicians making investment decisions based on the latest political winds. By all means, commissioners should work to assure that insurers can fulfill whatever claims are made in the future – but they shouldn’t bootstrap that legitimate authority into a politically motivated crusade.

Steven Greenhut is the founding editor of CalWatchdog. He is Western region director of the R Street Institute and a Sacramento-based columnist. Write to him at sgreenhut@rstreet.org.

Bigger seen as better

The move was widely interpreted as reflecting an industry incentive under the Affordable Care Act to consolidate in order to leverage economies of scale. “The Affordable Care Act imposes limits on health insurers’ profits, so these companies view consolidation as the best way to lower costs and take advantage of rising revenues,” the Los Angeles Times noted.

But Anthem CEO Joseph Swedish insisting that the new mega-company was a win for consumers. “Going forward our new company will deliver an acceleration of innovative and affordable health and protection benefits solutions that help address our health system’s challenges and provide supplemental insurance protection, and health care security to consumers, their families and the communities we share with them,” he said.

With health costs continuing to climb upward, however, consumer groups questioned whether fewer choices and less attractive rates were around the corner. And California insurance commissioner Dave Jones told the Times “he doubts there will be any significant benefits from this round of mergers,” emphasizing that “increased consolidation has resulted in less competition and higher pricing.”

In a statement responding explicitly to the Anthem-Cigna merger, Jones expressed even greater skepticism. “California’s health insurance market already suffers from consolidation, with the four largest health insurers in the individual market controlling more than 85 percent of the market,” he said, the Daily News reported. “Further consolidation will result in even less competition among health insurers and will leave consumers and employers with fewer choices and the potential for greater premium increases. Studies of prior mergers of health insurers found that health insurance prices increased as a result of mergers.”

Mixed evidence

Defenders of the post-Obamacare regime in California argued that the projected rise in rates — a bit less than last year’s — ought to be read, along with the addition of new Covered California participants, as good news. “The average premium will rise 4 percent in 2016, a slight decrease from the 4.2 percent jump in 2015,” according to the Associated Press, citing Peter Lee, the state exchange’s executive director. “Larry Levitt of the nonpartisan Kaiser Family Foundation said Covered California appears to be gaining momentum with several major insurers jockeying for market share and substantial enrollment. It’s unclear how the rest of the private market will look yet, he said.”

On the other hand, the 4 percent average has yet to be confirmed by regulators, and in large areas of the state, increases will be as much as twice as high. “On average, Northern Californians will see a 7 percent increase in 2016 premiums, compared with a 1.8 percent increase in the state’s southern half,” the Sacramento Bee reported, with some consumers poised for double-digit hikes. “An average 40-year-old individual in a midrange Silver plan will pay $384 in the state’s north versus $296 in the south, according to Covered California. In the four-county Sacramento region, where 78,000 individuals were signed up for coverage in 2015, the increase will be 8.2 percent.” Those figures reflected the limit of increased competition afforded by the entry of United Healthcare into the Northern California market, where its coverage area includes Amador, Butte, Calaveras, Sutter, Yolo and other counties, according to the Bee.

Meanwhile, the Bee observed, California families whose beneficiaries are spread across Medi-Cal and Covered California plans have encountered a daunting mix of bureaucracies that have yet to interface efficiently: “Health insurance agents, who have been responsible for a large percentage of Covered California enrollments and help consumers navigate the process, are nearly powerless to help their mixed-coverage clients.”

“After surpassing its first year goal by 400,000 — signing up 1.1 million people in private plans — Covered California’s enrollment climbed to only 1.3 million this year, wildly off its 1.7 million target for 2015,” the San Jose Mercury News reported, calling the situation a “crossroads.”

“Experts are watching carefully because the financial health of the exchange depends on growing its number of enrollees. If that doesn’t continue — or even backslides — shrinking dollars could threaten the way the exchange now operates. Finally, provisions of the law designed to offset possible losses for health insurers will expire in 2017. That could also impact premiums — and enrollments — even further.”

The rocky road recalled to mind warnings from early Obamacare critics who raised the specter of a so-called “death spiral” brought on by insufficient enrollment to even out insurance risk across pools of beneficiaries. But according to the Mercury News, “Peter Lee, Covered California’s relentlessly upbeat executive director, remains unfazed.”

Lee has invested much of his time and reputation in the exchange’s success, at least relative to other, ailing setups in states around the country. Steeling his nerve, Covered California recently “awarded its executive director a $65,000 bonus,” just “four months after giving him a 24 percent raise,” as the Los Angeles Times observed. That brought Lee’s annual salary to $333,120, according to California Healthline. (Meanwhile, Deputy Director Yolanda Richardson saw her yearly pay rise over 11 percent to $265,668; all told, the exchange’s top 14 most highly-paid executives all cleared five figures in income per month.)

Rising rates, unknown figures

One explanation for the handsome compensation packages would be familiar to advocates of high pay for CEOs in the private sector: retaining talent. Some consumer advocates, according to the Times, “have credited Lee with securing lower-than-expected rates from health insurers the last two years and reaching substantial enrollment of nearly 1.4 million people.”

But California Insurance Commissioner Dave Jones dismissed that claim. In an interview with State of Reform, Jones characterized California’s health insurance providers as a virtual monopoly, “attributable in part to decisions made by Covered California and unchecked rate increases as top issues.”

Inside and outside the exchange, he said, “you have an extraordinary concentration of the market going to a handful of carriers. As a result, they function in a classical economic sense as monopolists or oligopolists who are able to dictate prices for what is an essential good that people desperately need and are willing to pay just about anything to get.”

Jones has raised hackles among Democrats for challenging Covered California’s effectiveness and propriety. But activists further to his left have created bigger headaches. Not all consumer groups have been kind to Covered California executives. In a letter to Lee, Santa Monica-based Consumer Watchdog demanded that Covered California release its planned rate increases for next year. California “has successfully lobbied the federal government to delay public disclosure of qualified health plan rate change proposals for 2016,” the organization noted, becoming the only state in the nation to do so.

“Citizens of every other state now have access to proposed rate hikes, except the people of California, who are already disadvantaged by the absence of rate regulation in this state,” the letter warned.

Privacy worries

Complicating the picture of Covered California’s health, the exchange has spread unease among would-be allies by forging ahead with a controversial centralized data plan.

“Exchange officials say they’re planning to create a large database with information on patients’ doctor and hospital visits, and prescription drugs. The information could be used to determine whether patients are getting appropriate care,” KPBS reported, but “privacy rights experts are raising some questions.”

Concerns have extended to the prospect of a further leveling off in enrollment. “We’re very concerned that it’s going to chill people from getting health care,” said World Privacy Forum executive director Pam Dixon.

That’s especially true here, where the Obamacare implementation is called Covered California.

The Wall Street Journal just ran an article, “California Man Opts Out of Traditional Health Insurance with Alternative Plan.” It reported on how John Lavey, a property insurance broker in Orange County, joined a Christian medical cooperative called Medi-Share.

In pitching the ACA back in 2009, President Obama promised numerous times, “If you like you health care plan, you can keep it.” But Lavey couldn’t. After Affordable Care Act rules disqualified his prior health plan, he was forced to take a new plan that doubled his premiums.

Lavey said his health care costs are $400 less per month under Medi-Share than under Obamacare. And he doesn’t have to accept a health plan he never wanted.

But a religious-based health care cooperative is not insurance, thus it is not regulated.  Members pay a fixed fee each month and the money comes out of the cooperative’s common pot of funds when he goes to the doctor.

Obamacare exemptions only apply to religious-based health care co-ops established before 2000.   That means Medi-Share of Florida, Samaritan Ministries of Illinois, and Ohio-based  Christian Healthcare Ministries and Liberty Healthshare are the only cooperatives with Obamacare exemptions.

No guarantee

Courts have ruled Christian health care cooperatives can operate as long as they disclose there is no guarantee that members’ bills will be paid in full or in every case.

And Christian health care cooperatives have some requirements that wouldn’t appeal to everyone. According to the Journal, “To join Medi-Share, consumers have to sign an attestation of Christian faith and promise to abstain from tobacco, illegal drugs and sex outside of marriage; certain things, such as abortion and contraception, aren’t covered.”

The Reason Foundation did a case study of one family in 2013 that belonged to Samaritan Ministries. A family of three would pay $4,400 per year, while private insurance under Obamacare would only cost about $2,500 because two-thirds of it would be subsidized.

But the Lavey family was saving $400 per month over a private insurance plan approved under Obamacare.

Not a scam

As political scientist Walter Russell Mead of Bard College has noted, medical cost-sharing associations are unique in that they use social capital to contain costs.  A 2012 statistical study by the World Health Organization found there was a strong causal relationship between social capital and individual health.

Members refrain from running up costs because that will mean less for both themselves and others. Additionally, Christian health care cooperatives actively negotiate with doctors and hospitals to reduce costs on a case-by-case basis.

Concluded a 2013 comprehensive study by Benjamin Boyd, staff attorney for the Alabama Supreme Court, published in the Journal of Law and Health, “Health Care Sharing Ministries are not some kind of scam or ‘part of the problem(s) with the American health care system’ but are ‘part of the solution.’”

As of April 2014, Medi-Share had 6,916 members in California, but is growing rapidly mainly due to statewide radio ads. It’s part of a small but burgeoning Christian faith-based alternative to Obamacare in California that seems to fit a gap in the health care financing spectrum.

      Comparison of Top Three Christian Health Care Cooperatives

For some time, Obamacare critics have warned that health insurance premiums would skyrocket once the Affordable Care Act went into effect.

Now they say the leap in premiums, as calculated by state Insurance Commissioner Dave Jones, is just the beginning of hefty annual hikes in the years ahead.

Jones recently released an analysis – conducted in response to complaints regarding steep increases in health insurance rates – that compared 2013 and 2014 health insurance plan rates. The analysis found the average rate increases for people who had insurance in 2013 and bought 2014 coverage were between 22 and 88 percent.

Those with incomes that were low enough received premium subsidies under the Affordable Care Act. But many Californians whose incomes were not low enough received a major rate increase, Jones said.

“What the department found was that in many cases those purchasing 2014 coverage were paying significantly higher rates than what they had paid in 2013 and the beneficial differences in policies was minimal and therefore could not be justification for the significant rate increases,” said Janice Rocco, the deputy commissioner over health policy for the California Department of Insurance.

Just the beginning

Stephen Parente, a professor of health finance and the associate dean of the Carlson School of Management at the University of Minnesota, said these sharp premium hikes are just the beginning for Californians who don’t qualify for the Affordable Care Act.

Parente released a study in May finding that structural problems in the ACA would lead to significant premium increases in the years ahead, prompting droves of Californians to cancel their health insurance policies. As a result, Parente calculated the ranks of the uninsured in California would swell to 11 percent within a decade.

“The increases will be above 3-4 percent a year and will probably average 6-8 percent on average over the next 20 years,” Parente said. “There will be a spike, unless the Obama administration changes its policies, in 2017. That spike could increase the number of the uninsured by 2-3 million people over the long term and that would mean that 5-6 years later up to 5 million would be uninsured than otherwise would have been insured.

“So the short of it is that premium increases are going to drive increases in the number of the uninsured, so that by the time you get to 2023, we could have essentially 40 million uninsured nationwide. In fact, because of the premium increases, from 2015 on, we’ll have an increase in the number of uninsured that continues to grow for the next 10 years and beyond.”

For some, Parente’s expectation of rapidly rising health insurance hikes may seem puzzling, especially after Covered California announced recently that the vast majority of their clients will see low increases in their health insurance premiums next year. Covered California, the state’s marketplace for the federal Affordable Care Act, announced health insurance premiums will only rise an average of 4.2 percent next year.

‘Good news’

“This is good news for Californians and an example of how Covered California and the Affordable Care Act are working to make health insurance affordable,” Covered California Executive Director Peter V. Lee said in a prepared statement.

But Parente explained that the 4.2 percent increase over the next year is just to mollify voters between now and the 2016 presidential election and rates will spike significantly in 2017.

“It’s not surprising that they tried to get as much of a price increase as they could before the whole Affordable Care Act went into play and now, particularly with Proposition 45 on the ballot, the insurance companies who have enormous political influence decided not to raise their premiums very much,” said Joel W. Hay, a professor of health policy and economics at the University of Southern California.

In November, California voters will decide whether to approve Prop. 45 – a measure that is opposed by insurers, who have spent $37 million in an effort to defeat it. The measure would grant Jones the power to determine whether proposed health insurance rate increases are justified.

Delays

Opponents of Prop. 45 argue it would create lengthy delays and barriers to care and threaten access to affordable care for the more than 1.4 million Californians who secured health coverage through Covered California. They also dispute Jones’ analysis.

“The Insurance Commissioner’s report was misleading and politically motivated in order to promote a ballot measure that would give him sweeping new powers over health care decisions,” said Robin Swanson, the No on Prop. 45 spokesperson.

Proponents of Prop. 45 say it would prohibit excessive profits and require health insurers to get approval for rate hikes. Consumer Watchdog, a Santa Monica-based nonprofit organization, argues the measure will apply the same rules to health insurance that have saved state drivers more than $100 billion since 1988 while making the auto insurance market highly competitive.

“California consumers have been overwhelmed by a tsunami of relentless rate hikes because there is nothing at the federal or state level to stop insurers from imposing unreasonable increases,” Robert Leonard of the Consumer Watchdog Campaign said in a prepared statement. “Insurers hope that a $37 million campaign of deception will defeat Proposition 45. But if Prop. 45 doesn’t pass, health insurers will continue to stick it to consumers as they have for years.”

Continued increases

In spite of the pro and con arguments surrounding Prop. 45, Michael Cannon, director of health policy studies at the Cato Institute in Washington, D.C., said the reality is that health insurance costs will continue to rise for the majority of Californians in the years ahead.

“The overall trend is for premiums to rise,” Cannon said. “You’ll still get some disagreement about that. They will say that, after accounting for subsidies, a lot of people’s premiums will fall. The problem with that is it doesn’t mean premiums have gone down, but that the costs have just been shifted to the taxpayers.

“On average, premiums are increasing and you’d expect that to happen because this law makes health insurance available to people who were too sick to get health insurance before. And both of those factors will lead to higher claims and higher premiums.”

But for now, one that caught my eye is backed by Insurance Commissioner Dave Jones and would give him vast new powers to regulate medical-insurance rates, much as he already has for car and housing insurance.

That would be on top of the Obamacare mess. And who knows what the U.S. Supreme Court will rule this week on the Obamacare mandate forcing companies or charities to cover contraceptives even if it violates their religious beliefs — if the mandate stands, an extreme violation of the First Amendment right to freedom of religion.

The bottom line of all this is more medical socialism, meaning much worse care. I suggest saving your money so, if you need real care, you can fly to Singapore or some other free country where they have inexpensive care you can pay for with cash.

It’s a shame. Before 1965, when LBJ’s socialized Medicare and Medicaid systems were imposed on us, America had the world’s best medical system, including charity for the poor. Now each of us has a date with a death panel.

Although Democrats face two scandals involving members of the state Senate, the party is well positioned for the 2014 campaign cycle. The party controls every statewide office and both houses of the state Legislature. Overall, the party has an advantage in voter registration of 2.6 million more than Republicans.

Gov. Jerry Brown is expected to cruise to reelection and could once again sweep Democrats into all of the statewide constitutional offices. The Democratic advantage is strongest in campaign fundraising. As of the last reporting deadline, 10 Democrat campaign committees had a collective $40 million in cash on hand.

And those big fundraising warchests could be put to work for the state’s Democratic Party.

Those 10 Democratic campaign committees could easily collect a few hundred thousand dollars more per year, if they simply managed their money better. And, no, this hot tip isn’t another scheme from Kindee Durkee.

In March 2012, Durkee, a popular California campaign treasurer, pleaded guilty to embezzling more than $8 million from Democratic candidates, including Sen. Dianne Feinstein.

Interest

Without dialing for dollars, Democrats could earn interest on their multi-million campaign war-chests. Under state campaign finance guidelines, campaign accounts can be invested in interest-bearing accounts. A few Democrats, such as State Treasurer Bill Lockyer, have figured this out. Last year, he earned a little more than $5,000 in interest.

Rep. Darrell Issa, R-Vista, is the best financial planner when it comes to his campaign account. According to Roll Call, his congressional campaign committee earned $82,457 from investments in just the third quarter of 2013. Among those returns were $19,293 in dividends on investments with Merrill Lynch, and $63,164 on unrealized gains. In the second quarter, the committee earned $32,108. In the first quarter, the committee earned $37,541.

If California Democrats wanted a more liquid investment, they could still earn interest from high-yield online savings accounts. According to the personal finance experts at Nerd Wallet, several banks are currently offering 0.90% APY rates for online accounts. At that rate, Democrats could earn a cool $30,133 per month, or $361,605 per year in free money.

California Democrats’ war-chests:

California Democratic Party
Cash on Hand: $10,124,593.00
Interest Earned in 2013: $906.28
Potential Campaign Interest: $91,121.34

Jerry Brown
Current Office: Governor
Campaigning for 2014: Re-Election
Cash on Hand: $16,957,317.44
Interest Earned in 2013: $74.39
Potential Campaign Interest: $152,615.86

Gavin Newsom
Current Office: Lieutenant Governor
Campaigning for 2014: Re-Election
Cash on Hand: $1,703,596
Interest Earned in 2013: $2,529.01
Potential Campaign Interest: $15,332.36

Bill Lockyer
Current Office: State Treasurer
Campaigning for 2014: None
Cash on Hand: $2,109,731.00
Interest Earned in 2013: $5,020.32
Potential Campaign Interest: $18,987.58

Kamala Harris
Current Office: State Attorney General
Campaigning for 2014: Re-Election
Cash on Hand: $3,103,865.00
Interest Earned in 2013: $262.70
Potential Campaign Interest: $27,934.79

John Chiang
Current Office: State Controller
Campaigning for 2014: State Treasurer
Cash on Hand: $1,833,550
Interest Earned in 2013: $0.00
Potential Campaign Interest: $16,501.95

John Perez
Current Office: Speaker of the State Assembly
Campaigning for 2014: State Controller
Cash on Hand: $1,866,339
Interest Earned in 2013: $0.00
Potential Campaign Interest: $16,797.05

Betty Yee
Current Office: Board of Equalization
Campaigning for 2014: State Controller
Cash on Hand: $502,178
Interest Earned in 2013: $0.00
Potential Campaign Interest: $4,519.60

Dave Jones
Current Office: Insurance Commissioner
Campaigning for 2014: Re-Election
Cash on Hand: $1,420,677
Interest Earned in 2013: $74.39
Potential Campaign Interest: $12,786.09

Tom Torlakson
Current Office: Superintendent of Public Instruction
Campaigning for 2014: Re-Election
Cash on Hand: $556,561
Interest Earned in 2013: $415.36
Potential Campaign Interest: $5,009.05