Consumer Watchdog Failure Could Help Auto Discount Initiative

Santa Monica, Calif.-based Consumer Watchdog’s proposed ballot measure to require health insurance companies to get approval before raising their rates narrowly missed qualifying for November’s ballot by Thursday’s deadline – Consumer Watchdog got 109 percent of the signatures necessary to qualify on a random sample verification rather than the required 110 percent.

However, Consumer Watchdog’s failure to qualify the Insurance Rate Public Justification and Accountability Act may be a win for the backers of an automobile insurance persistency initiative on the Nov. 6 ballot.

The 2012 Automobile Discount Act is backed by the American Agents Alliance and personally by Mercury Insurance Co. Chairman George Joseph. The Secretary of State verified the 2012 Automobile Insurance Discount Act would qualify for the November ballot back in January, after the initiative got the 504,760 signatures required to place it on a statewide ballot.

While Consumer Watchdog’s initiative is focused on healthcare by establishing prior approval for health insurance, the proposed act would also prohibit “unfair pricing” not only for health, but for auto and home insurance based on prior coverage and credit history.

Its wording made it a competing initiative against the Automobile Discount Act, enabling the one with the most votes to effectively kill the competing initiative. Backers of the Automobile Discount Act called Consumer Watchdog’s wording about auto and homeowners’ insurance a “poison pill.”

Now that it’s gone away – it has gone away for now, but Consumer Watchdog has sworn to qualify it for the next statewide ballot – backers of the Automobile Discount Act say it makes the issue less confusing for voters and gives their initiative an even better chance to pass.

“There’s no doubt about it … they were trying to create confusion that relates to auto insurance also,” Terry McHale, a campaign spokesman for the Automobile Discount Act, said referring to Consumer Watchdog’s initiative, the abesense of which he said “helps create greater clarity on the ballot.”

But McHale said its backers have been confident all along the Automobile Discount Act will pass.

“We’re very confident in our initiative,” he said.

The initiative is similar to Prop. 17 in 2010, which was narrowly defeated by voters.

According to McHale: Under this initiative, not only can consumers take their persistency discount from one carrier to another, but consumers keep their discount if it lapses for up to 90 days for any reason, they can shop around their discount, keep the discount if they are active in the military, keep the discount for up to 18 months if they have lost a job or been furloughed, and if they are living at home with their parents or return home after college.

Under the initiative, motorists without insurance will be eligible for a percentage of the discount within one year and get an increasing percentage every year for five years, he added.

The initiative has received some bipartisan support so far. However Consumer Watchdog has argued the initiative penalizes those without a recent insurance history by offering discounts to other drivers.

Both the initiatives would expand Proposition 103. A major provision of Prop 103 dealt with personal automobile insurance, requiring insurance rates to be determined using the following factors in decreasing order of importance: insured’s driving safety record, number of miles driven annually by the insured, and number of years of driving experience the insured has had.

The proposition also prevented rates from being determined based on a person’s history of insurance.

Expect Consumer Watchdog’s initiative to be back. Elections officials’ projections of 109 percent validity make the initiative all but certain to appear on the next general election ballot after November, the Santa Monica, Calif.-based consumer group stated.

The Consumer Watchdog Campaign also stated that the Supreme Court’s ruling on Thursday requiring all Americans to buy health insurance by 2014 or be taxed in 2015 makes the ballot measure’s rate regulation critical to Californians being able to afford coverage.

“We are disappointed because we wanted voters to have their say over escalating rate hikes sooner rather than later,” Jamie Court, the initiative’s proponent and president of Consumer Watchdog, said in a statement. “Voters will have their say to limit insurance company profiteering, but unfortunately they will have to wait to do it. Now that the Supreme Court has said Americans must buy health insurance, it’s critical that all Californians be able to afford their insurance. Health insurance companies are on notice that if they raise rates excessively from now on, voters will have final say over those rate hikes, even if they will have to wait for the next general election to do it.”

The ballot measure would require health insurance companies to get approval before raising rates and allows that refunds be ordered on rates that are considered excessive after Nov. 7. When voters approve the measure, the insurance commissioner will have the power to retroactively order refunds for excessive rates, Consumer Watchdog stated.

Registrars will now review all of the 794,649 signatures submitted during the next 30 business day to validate the campaign collected the needed 504,760 signatures. The random sample found that 547,601 of the signatures were valid but 555,236 were needed by Thursday to make November’s ballot. The campaign collected enough signatures to qualify for the ballot, but finished at the last possible moment with about 7,635 too few signatures to meet the 110 percent random sample requirement.

“We simply did not have the resources or volunteer signatures to do it any quicker,” Court said. “Voters will have the last word, however, and insurance companies will still be accountable for any excessive rates they try to pass on to consumers during the next two years.”

In fact the issue of health rate reviews is not dead this year at all. Following the Supreme Court Decision on Thursday, California Insurance Commissioner Dave Jones called for the passage of Assembly Bill 52.

AB 52, authored by Assemblyman Mike Feuer, D-Los Angeles, who is also running for L.A. City Attorney, would require health insurers to file rate hikes for approval by the Department of Insurance. The bill is awaiting hearing in Senate.

“We need to pass a law in California to provide for the authority to reject excessive health insurance rate increases,” Jones said during a conference call with the media on Thursday.

The bill has a long list of supporters and opposition. Supporters include ACLU of California, AARP, the California Federation of Teachers and Consumer Watchdog. Opposition to the bill includes the California Chamber of Commerce, American Insurance Association, California Medical Association, League of California Cities and insurers like Blue Shield of California and Healthnet.

McHale said he believes that bill will fail because it would bring intervenor fees into play for health insurance.

The fees were created by Prop. 103 and pay groups like Consumer Watchdog for intervening in insurance companies attempts to make rate hikes.

Since 2008, Consumer Watchdog, and its predecessor, Foundation for Taxpayer and Consumer Rights, is the only intervenor listed in rate fillings. Last year, Consumer Watchdog was paid $849,194.28 for intervening. The group was paid nearly as much in 2010, and in 2009 the group was paid nearly $2.5 million for intervening.

“If they took out intervenor fees from AB 52 it would probably pass,” McHale said, adding that Consumer Watchdog is a “group with a vested interest.”

Consumer Watchdog has defended those fees, stating the group has taken in about $2.4 million in legal fees for intervening in rate hikes, but has saved consumers $2 billion in doing so.