(image: lillieinthecity / flickr)

In two years the voters of California will get to decide whether or not to give state regulators the right to review and reject unreasonable health insurance premium increases. The California Secretary of State recently announced that Consumer Watchdog succeeded in gathering the roughly half a million valid signatures to qualify their initiative for the November ballot in 2014. It will be the third initiative set for the 2014, joining two already put there by the legislature. The official title and summary is:

APPROVAL OF HEALTHCARE INSURANCE RATE CHANGES. INITIATIVE STATUTE. Requires health insurance rate changes to be approved by Insurance Commissioner before taking effect. Requires sworn statement by health insurer as to accuracy of information submitted to Insurance Commissioner to justify rate changes. Provides for public notice, disclosure and hearing on health insurance rate changes, and subsequent judicial review. Does not apply to employer large group health plans. Prohibits health, auto and homeowners insurers from determining policy eligibility or rates based on lack of prior coverage or credit history. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Increased state administrative costs ranging in the low millions to low tens of millions of dollars annually to regulate health insurance rates, funded with revenues collected from filing fees paid by health insurance companies. (11-0070)

The initiative is modeled after Proposition 103 passed in 1988 regulating how car insurance rates can be set. If approved, the initiative will required health insurance companies to justify their rate increases and will give the insurance commissioner the authority to reject unreasonable increases. California is one of the few states where regulators don’t have the authority to reject excessive rate increases.

The initiative campaign started as the result of the legislature failing to act on the issue. Assembly Bill 52, which would have created rating review in California, narrowly won approval in the state assembly but stalled in the state senate last year.

The original plan was to get the initiative on the 2012 ballot, but election officials were unable to verify enough valid signatures by the deadline, so instead it will appear on the 2014 ballot. The timing should be interesting given that early 2014 is when the Affordable Care Act health care expansion is set to begin; as a result, the number of people buying individual insurance in California is expect to increase significantly in the months leading up to the vote on this initiative.