Health Insurance Makes Big Shift to Managed-Care Regulator

A big shift in the individual health insurance market in 2014 gave the California Department of Managed Health Care the most enrollment in all three sectors of commercial insurance.

DMHC now regulates 82 percent of the individual market, 77 percent of the small-group market and 91 percent of the large-group market, according to a new study released Thursday by the California Healthcare Foundation.

The California Department of Insurance used to be the dominant regulator of individual health insurance business in California.

“The numbers clearly document a shift, particularly in the individual market,” said Katherine Wilson, an independent health care consultant who crunched the data and wrote the report. “If you look at how many health insurers voted with their feet, it does seem that twice as many decided for efficiency or other reasons that it makes more sense to be under one regulator.“

The new data results from legislation enacted in 2012 that requires CDI and DMHC to publicly report year-end enrollment numbers for all the health plans and insurers they regulate. The figures exclude Medi-Cal.

The swings in 2014 were significant:

-DMHC gained 1.3 million individual enrollees, an increase of 298 percent, while CDI lost 646,277, a decline of 62 percent.
-DMHC gained 40,674 enrollees in the small-group market, an increase of 3 percent, while CDI lost 298,378, a 38 percent drop.
-DMHC lost 328,247 enrollees in the large-group market, a decline of 4 percent, while CDI was essentially flat, but DMHC regulates 8.87 million enrollees and CDI regulates 841,478.
-Both regulators grew their numbers with employers that self-insure by 16 percent, but CDI has a total of 5.35 million and DMHC, 1 million.

One reason for the shifts is that different insurance products used be filed at CDI than DMHC. California is the only state in the nation that splits insurance between two. regulators.

CDI had traditional insurance, while DHMC had health maintenance organization plans, but lines were blurred with advent of preferred provider organization plans.

Insurers have a choice of where they file PPOs and many went to CDI, which imposed fewer restrictions on benefit levels.

Obamacare changed that. Health care reform requires all plans to have the same benefit structure, regardless of the regulator.

DMHC spokesman Rodger Butler had little to say of the big shift in enrollees to that agency. “The report speaks to the success of Covered California and the Affordable Care Act,” he said, declining further comment.

Insurance Commissioner Dave Jones is not about to give up market share without a fight.

“The numbers are not a surprise,” he said Thursday. The two big health insurers in the individual market — Anthem Blue Cross and Blue Shield of California — used a loophole in California law to move their products to DMHC and avoid paying premium taxes, he said.

Assembly Bill 1434 by Assemblyman Kevin McCarty of Sacramento seeks to close the loophole. The bill is co-sponsored by McCarty and Jones.

There’s disagreement the taxes, which are the subject of litigation pending before the California Court of Appeal. Assembly Bill 1434 failed to get out of its first legislative committee and is considered a two-year bill.

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