California’s Obamacare exchange and the state insurance commissioner are on a collision course over Proposition 45, a popular ballot measure aimed at reining in health insurance rates.

Covered California officials lashed out at the statewide ballot initiative this week and warned that it could be disastrous to the state’s implementation of the federal healthcare law.

In November, voters will decide whether to give Insurance Commissioner Dave Jones veto power over rate increases for about 6 million Californians who have individual and small-business policies. Without this authority, Jones says, consumers will keep being subjected to excessive rate hikes and Obamacare won’t be affordable.

Until now, the state-run exchange had largely avoided a public clash over Proposition 45 with Jones, a Democrat who supports the health law. That restraint disappeared at an exchange board meeting Thursday, and officials there will take up a vote next month to formally oppose it.


These moves thrust Covered California into the middle of what’s expected to be a highly contentious and costly campaign.

Anthem Blue Cross, Kaiser Permanente and other companies have already contributed more than $37 million to defeat the measure. Insurers argue that the initiative is unnecessary because the Affordable Care Act already imposes new rules to protect consumers.

The ballot fight starts with broad support for Proposition 45. A Field Poll released this week found 69% of California voters favored the proposition. That support may wane once ads attacking the measure ramp up.

Susan Kennedy, an exchange board member and former chief of staff to Gov. Arnold Schwarzenegger, had the sharpest words for the ballot measure. She warned that the initiative could damage healthcare reform in California “permanently, perhaps fatally.”


“Even under the best-case scenario, enactment of this measure significantly complicates Covered California’s ability to enact healthcare reform,” she said. “I just think it’s the wrong time to add an entire layer of complication and risk to what we are attempting to achieve.”

Three others on the five-member board said they shared many of Kennedy’s concerns. A fifth board member, Robert Ross, wasn’t present for the discussion.

“I don’t think this is the right law at the right time,” said Diana Dooley, chairwoman of the exchange and secretary of California’s Health and Human Services Agency under Gov. Jerry Brown. “I feel very mother-bearish on protecting the investment we have made in implementing the Affordable Care Act.”

In an interview Friday, Jones said there’s no merit to the exchange’s criticisms and he said board members know rate regulation is no threat to Obamacare.


“The board members are seeking to politicize Covered California and use it to advance their own personal objections to health insurance rate regulation. I think it’s very bad for Covered California,” he said. “More than 35 other states have enacted heath insurance rate regulation and it has not had any negative impact on Obamacare.”

Other backers of the ballot measure said the exchange’s stance is the latest proof that it’s too cozy with the insurance industry.

“It is not wise for a government agency that represents the public to go against the wishes of 7 in 10 Californians who feel ripped off and want rate regulation,” said Jamie Court, president of Consumer Watchdog.

The Santa Monica advocacy group worked with Jones in 2012 to gather signatures for the initiative after repeated attempts to pass a law in the state Legislature failed. Court said the exchange is sullying its image and “will be perceived as an attack dog for the health insurance companies.”


Some exchange officials were hesitant about scheduling a formal vote to oppose Proposition 45 for fear of injecting the exchange even further into the campaign and alienating some health-law allies.

Some consumer groups agreed and urged the exchange to stay out of the fray. They said one reason for the exchange’s initial success has been its ability to steer clear of the divisiveness over Obamacare.

“Covered California has worked hard to be a trusted voice and has had bipartisan support,” said Beth Capell, a lobbyist for Health Access California, a patient advocacy group. “Inserting yourself into a polarized discussion seems to be problematic.”

Covered California board members expressed their views after the agency’s executive director, Peter Lee, ticked off a litany of concerns about the initiative.


Lee said the new regulatory approach could undermine the exchange’s ability to negotiate with health plans over rates, their provider networks and other benefits by leaving the ultimate decision with the insurance commissioner. He also said there may be increased risk of insurers withdrawing from the market.

Last month, the exchange announced that next year’s rates for individual policies would rise a modest 4.2% statewide, on average.

Proposition 45 also establishes a process for outside groups to challenge rate filings. The exchange worries that could create delays and health plan rates wouldn’t be ready in time for annual enrollment, throwing the market into disarray. Jones has said deadlines would be set to avoid any disruption.

Tensions between Jones and Covered California have been building for months.


Jones scolded the exchange last fall for its refusal to let about 900,000 Californians keep their health plans that were being canceled after President Obama granted that leeway nationwide.

Then last month, Lee denounced a report on health insurance rate hikes issued by Jones as “misleading and distracting.”

chad.terhune@latimes.com

Twitter: @chadterhune