This Ballot Initiative on Health Care Is So Bureaucratic, It Even Scares Obamacare Supporters

California's Proposition 45 would make health care even more convoluted.


SACRAMENTO — In the well-known scene in Casablanca, Captain Renault orders Rick to shut down his gin joint. "I'm shocked, shocked to find that gambling is going on in here!" he said, pausing long enough to grab his winnings. That scene always reminds me of our government. We know how it works, yet many of us still act surprised there's gambling in the Capitol casino.

The latest "shocked" moment came when the Associated Press (AP) reported earlier this week on some controversial contracts issued by Covered California — the new Obamacare-inspired insurance exchange that mainly sells subsidized health plans to people who can't otherwise get coverage.

"California's health insurance exchange has awarded $184 million in contracts without the competitive bidding and oversight that is standard practice across state government, including deals that sent millions of dollars to a firm whose employees have long-standing ties to the agencies executive director," wrote AP's Michael Blood.

This looks bad, especially as Obamacare supporters fight back an initiative (Proposition 45) on the November ballot that would give the state's insurance commissioner the power to approve or reject health-care rate hikes — the same power he has with most other types of insurance.

"The contracts reflect a troubling practice at Covered California," wrote Consumer Watchdog President Jamie Court, in a letter to the attorney general. "An independent investigation by your agency is warranted to determine … whether consultants have inappropriately used their position with the government agency to advance the interests of former and current insurance industry employers."

Calls for an audit make sense, perhaps, but Consumer Watchdog is the key backer of the November initiative. The group has made millions of dollars challenging insurance rate hikes under the "intervenor" process codified in Proposition 103, the 1988 initiative that regulates auto, home and casualty insurance and is the model for the new ballot measure.

Under this system, intervenors are paid to challenge rate changes proposed by insurance companies, in a process that can take many months to resolve. Obamacare supporters are rightly concerned that if Proposition 45 passes, it will bollix up the fledgling health exchange's ability to negotiate rates.

Polls last month put the proposition ahead, but with support falling. This black eye for Covered California has reignited interest in the race. Covered California officials say the no-bid contracts are reasonable, given few firms have the expertise in creating exchanges and they were in a time crunch to meet deadlines. One of these no-bid recipients helped build the former Healthy Families system, which is similar to Covered California.

The real battle, as the Los Angeles TimesJon Healy explained recently, is between Covered California supporters who claim the new exchange is lowering premiums, and Proposition 45 supporters who claim that "insurers are gouging their customers" so Californians need more protection. The no-bid issue works in the favor of the latter argument in this fight over election "optics."

Nobel-winning economist George Stigler wrote about "regulatory capture," in which regulated industries often exert excessive influence in the agencies that regulate them.

It certainly applies here, but it seems ironic for Consumer Watchdog to complain about cozy relationships between the insurance industry and the new insurance exchange given its cozy relationship with the current commissioner, Dave Jones. It seems easier for interest groups to control one official rather than an entire insurance exchange. "I don't buy that — not when that official is accountable to the voters every four years," Court told me. I'm skeptical that voters offer enough of a check.

No-bid contracts are problematic, but a bigger problem may be the lack of a truly competitive insurance market in California's highly regulated and politicized insurance industry. I'm no fan of Obamacare, but consider what will happen if California voters add to this convoluted system yet another set of regulations and yet another level of power to one official.

Instead of feigning shock at officials handing out no-bid contracts, Californians ought to be truly shocked that any of these systems work at all.

NEXT: Nurse Declared Ebola Free

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Covered California officials say the no-bid contracts are reasonable, given few firms have the expertise in creating exchanges and they were in a time crunch to meet deadlines

    I’d bet there are more than a few companies in silicon valley which could manage even without the business knowledge because of their understanding of the technology. Of course, the real reason was cronyism, so they don’t want logic.

    1. The real business is cronyism so there is no business logic. Technical understanding serves only as advertising.

      You bid to build something that will work as well as Amazon.com and then find out what it’s supposed to do. Then, if you like your contract, you can keep it.

  2. Healthcare is poised to explode (cost wise ) upwards and the ACA has not done a thing about it. Thank Obama and Nancy (the pill) Pelosi. Oh and don’t worry Obama will have the taxpayers pick up the tab. You know the real inequality thing. That being if you can afford to pay for your family and somebody who is uninsured it’s your duty to do so.

    Health insurance should be like car insurance and should kick in when there are major problems. Can you imagine what an oil change would cost if it was covered under your auto insurance? You don’t bill your car insurance for oil changes or little scratches in your car’s paint job.

    Also – unlike the govt website, auto insurance sites actually work! I pay $24/month for car insurance at Insurance Panda. With healthcare dot gov, it takes me hours to get an unaffordable BS rate. Who can afford $600/month insurance?

    All in the plan. Problems at the end so more can say they tried but couldn’t so now anyone can get an extension, further helping enrollment numbers. Add this to the 38 changes made to the law since passage, the joke continues. But, it’s the law of the land and cannot be changed!

    1. the ACA has not done a thing about it.

      Have to disagree there. The ACA has caused costs to skyrocket for anyone not getting subsidies.

      Health insurance should be whatever consumers want it to be. Want everything, buy an HMO. Want the basics, then a plan with a big deductible…

      Obamacare considers us too stupid to make the choice so we are now all herded into shitty high-deductible PPOs.

      1. Oh, but don’t you know, that elderly couple who are no longer capable of having children absolutely HAVE to have a pediatric plan on their insurance policy!!

  3. it will bollix up

    the word is “bollocks”! is your editor on holiday?

    /british indignation

    1. apparently my close-blockquote tag is on holiday

      1. Because you don’t pay me a living wage!

        1. He needs at least $15 (or ?25-ish?) per hour!

  4. I make up to USD90 an hour working from my home. My story is that I quit working at Walmart to work online and with a little effort I easily bring in around USD40h to USD86h? Someone was good to me by sharing this link with me, so now i am hoping i could help someone else out there by sharing this link?

    Try it, you won’t regret it!? w?w?w.M?o?n?e?y?k?i?n.c?o?m?

  5. my co-worker’s mother makes $71 /hr on the laptop . She has been unemployed for 9 months but last month her payment was $17334 just working on the laptop for a few hours. published here


  6. my co-worker’s mother makes $71 /hr on the laptop . She has been unemployed for 9 months but last month her payment was $17334 just working on the laptop for a few hours. published here


  7. Can you have some spare time to sit back in your chair having your laptop with you and making some money online for some interesting online work said Jenny Francis in the party last nightsee more what is for you there to increase your pocket money??.


Please to post comments

Comments are closed.