All posts by Consumer Watchdog

Teach Goliath A Lesson He’ll Never Forget

No candidate on the ballot this year can do as much for you as two propositions backed by Consumer Watchdog, Consumer Federation and other champions of the underdog.

YES ON PROP 45 will give us the power to stop price gouging by the health insurance companies.Congress requires us to buy health insurance, but they didn’t limit how much the insurance companies can charge us for it. That’s why we need Prop 45.

YES ON PROP 46 will make healthcare safer by preventing addicts from getting unnecessary prescription narcotics, requiring those who hold our lives in their hands to get tested for drugs, and allowing us to hold hospitals, doctors and insurance companies accountable when they injure us.

The insurance companies have spent over $100 million to defeat these pro-consumer propositions. They’ve bought off the politicians and paid for “studies” that predict disaster if these measures pass. And they’ve polluted the airwaves and the internet with outrageous lies about 45 and 46.

Let’s face it: our political system is corrupt. But, here in California, we voters can take matters into our own hands at the ballot box. We don’t have the money to compete with the industry, but – thanks to your support all these years – we have the truth on our side.

Tomorrow it will be 26 years since you joined me to pass Proposition 103 – the reform that stops insurance companies from overcharging us for auto, home and small business insurance. They said we could never defeat the insurance companies, but we did. They said it would never work…. But it did. California is the only state in the nation where auto insurance costs less today than it did in 1988! Prop 45 will extend that voter victory to health insurance.

Please join us again, tomorrow, by VOTING YES ON 45 AND 46.

Harvey Rosenfield

Founder – Consumer Watchdog

California DMV’s Autonomous Vehicle Regulations Must Protect Users’ Privacy

Driverless CarI was up in Sacramento today to call on the Department of Motor Vehicles to ensure that the regulations that they are developing to govern the use of autonomous vehicles – popularly known as driverless cars -will protect the operators’ privacy.

The company that will be most directly affected by the new autonomous vehicle regulations is Google, which is pioneering development of the robot-driven cars. The Internet giant was the driving force behind SB 1298, which charged the DMV with the task of developing the regulations and also rebuffed attempts to require privacy protections in the law.

However, it is not too late to implement privacy safeguards in this rulemaking and Consumer Watchdog called on the DMV to do so. Failure to act will mean substantial privacy risks from the manufacturers’ driverless car technology if there are not protections from what Google is best known for: the collection and use of voluminous personal information about us and our movements.

The DMV regulations must give the user control over what data is gathered and how the information will be used.  Merely stating what data is gathered with no explanation of its use is woefully inadequate. The DMV’s autonomous vehicle regulations must provide that driverless cars gather only the data necessary to operate the vehicle and retain that data only as long as necessary for the vehicle’s operation.  The regulations should provide that the data must not be used for any additional purpose such as marketing or advertising without the consumer’s explicit opt-in consent.

Without appropriate regulations, autonomous vehicles will be able to gather unprecedented amounts of information about the use of those vehicles.  How will it be used?  Just as we are now tracked around the Internet, will Google and other purveyors of driverless car technology now be looking over our shoulders on every highway and byway? Will the data be provided to insurance companies for underwriting purposes or to third parties that develop some kind of a driving score related to where and when individuals travel?  Will it be used to serve in-car advertisements or advertisements through other venues in the Google suite of products? Will it be used to track our movements and those of surrounding cars and mobile devices so that Google’s advertisers can better locate us?

Google is the aforementioned leader in driverless car research and is attempting to steer regulatory efforts in various states, especially California.  That’s why our concerns are so focused on the company. So I ask:  Why won’t Google endorse simple privacy safeguards for its self-driving cars?  I think there are two reasons.

First, Google’s entire business model is based on building digital dossiers about our personal behavior and using them to sell the most personal advertising to us.  You’re not Google’s customer; you are its product – the one it sells to corporations willing to pay any price to reach you.  Will the driverless technology be just about getting us from point to point or more about tracking how we got there and what we did along the way?

Second, computer engineers, who believe that more data is always better, are in charge at Google.  They may not know what they would use data for today, but they think they may someday find a use for it and don’t want any restrictions on them now.

Google is first and foremost an advertising company; 98 percent of its $38 billion in revenue comes from advertising, and the more personalized the marketing the better.  Indeed, Executive Chairman Eric Schmidt has said, “We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.”

John SimpsonWe all remember the last time Google deployed high tech vehicles around the world.  The result was Wi-Spy, the biggest wire-tapping scandal in history when the company’s Street View cars sucked up data from tens of millions of private Wi-Fi networks, including emails, health information, banking information, passwords and other data.  The company paid $7 million to settle the case brought by the state Attorneys General.  A class action suit is pending in federal district court.

Citing its “Don’t Be Evil” motto, Google claims it can be trusted with our information.  Facts show otherwise. The FCC released documents showing the Wi-Spy scandal was not a mistake or the work of one rogue engineer, as the company had claimed; but was part of the Street View design. The Commission fined Google $25,000 for obstructing its investigation.

The Federal Trade Commission imposed a $22.5 million penalty on Google for violating a consent agreement and hacking around privacy settings on Apple’s Safari browser, which is used on iPads and iPhones. Simply put, there is no reason to believe Google when it claims to be concerned about privacy.

Consumers enthusiastically adopted the new technology of the Internet.  What we were not told was that our use of the Information Superhighway would be monitored and tracked in order to personalize corporate marketing and make a fortune for companies like Google.  Consumer Watchdog supports driverless car technology and predicts it will be commonplace sooner than many of us expect.  However, it must not be allowed to become yet another way to track us in our daily lives.

Internet technology was implemented with little regard to protecting users’ privacy.  We are playing catch-up for our failure to consider the societal impact of a new technology.  The time to ensure that this new driverless car technology has the necessary privacy protections is while it is being designed and developed.   This is a concept known as “Privacy by Design.” It means privacy issues are considered from the very beginning and solutions are “baked in.” Trying to catch up after a new technology is developed and broadly implemented simply will not work.  The DMV should act to require that consumers must give opt-in consent before any data gathered through driverless car technology is used for any purpose other than driving the vehicle.

While we don’t propose to limit the ability of the cars to function by communicating as necessary with satellites and other devices, the collection and retention of data for marketing and other purposes should be banned. Unless strong protections are enacted in the new regulations, once again society will be forced to play catch-up in dealing with the impact of the privacy invading aspects of a new technology.



Posted by John M. Simpson, Director of Consumer Watchdog’s Privacy Project.  

California AG Takes Lead In Cybersecurity

Kamala HarrisData breaches at major retailers Target and Neiman Marcus during last year’s holiday shopping season affected more than 100 million people and focused new attention on the need to protect person information stored online.

While it’s clear that tough data breach legislation must be enacted, California Attorney General Kamala Harris is taking action to improve cybersecurity in the state before new laws are passed.  Today she released recommendations to California businesses to help protect against and respond to the increasing threat of malware, data breaches and other cyber risks.

In addition Harris is leading an investigation by state attorneys general into the Target and Neiman Marcus breaches, Don Thompson of The Associated Press reported:

Harris’ office also disclosed that California is leading a multistate investigation into the massive holiday season consumer data theft at discount retailer Target Corp. and luxury retailer Neiman Marcus, breaches that left tens of millions of customers at risk. More than 7 million Californians were affected by the Target breach alone, Special Assistant Attorney General for Law and Technology Jeff Rabkin said.

The U.S. Justice Department is taking the lead in trying to identify the culprits, who are suspected to be based overseas, while the multistate investigation focuses on whether the retailers share blame because they lacked the necessary precautions to prevent the thefts. The state investigation also will explore whether Target and Neiman Marcus acted properly as soon as they learned of the problem, Rabkin said in a telephone interview.

The guide, Cybersecurity in the Golden State, offers suggestions focused on small to mid-sized businesses, which are particularly vulnerable to cybercrime and often lack the resources to hire cybersecurity personnel. In 2012, 50 percent of all cyber attacks were aimed at businesses with fewer than 2,500 employees and 31 percent were aimed at those with less than 250 employees, Harris said.

Key recommendations for small business owners include:

  • Assume you are a target and develop an incident response plan now.
  • Review the data your business stores and shares with third parties including backup storage and cloud computing. Once you know what data you have and where it is, get rid of what is not necessary.
  • Encrypt the data you need to keep. Strong encryption technology is now commonly available for free, and it is easy to use.
  • Follow safe online practices such as regularly updating firewall and antivirus software on all devices, using strong passwords, avoiding downloading software from unknown sources and practicing safe online banking by only using a secure browser connection.

In 2003 California was the first state to pass a data breach notification.  In 2012 the law was amended to require any breach that involved more than 500 Californians be reported to the attorney general.

>The 170 breaches reported to the attorney general’s office in 2013 represent a 30 percent increase over the 131 identified the year before,  according to figures provided to The Associated Press. Among entities reporting breaches in 2012 were American Express Travel Related Services Co., Kaiser Permanente and several state government agencies, including the departments of Public Health and Social Services.

Given the current data breach laws Harris is taking meaningful action.  But, what’s ultimately needed is a law that would make her best practice recommendations legal mandates.  We need a California Financial Information Privacy Act that would:

  • Change breach notification standards to be immediate.
  • Set limits on the time data can be retained. And limits on what information can be collected and retained.
  • Write minimum-security standards into the law so that they are no longer voluntary.
  • Most importantly: create a private right of action. Put a price tag on retailers’ mistreatment of our private financial information.

John Simpson

Until there is a real price to pay, Target, Neiman Marcus and other retailers will continue to make us targets.



Posted by John M. Simpson, Consumer Watchdog’s Privacy Project Director.

Target Needs to Pay for Targeting Our Privacy

Target ShirtTarget is targeting our privacy. There’s a big red bullseye, a target – like the one on the shirt I’m wearing today – that Target and Neiman Marcus, who chose not to show up to answer questions today, have put on us because they haven’t done enough to protect our private financial data. And the reason is that there’s no financial incentive to do so.

110 million Americans had their personal financial information breached. That ‘s one out of two adult Americans. I was in Sacramento today to testify in front of a joint California Assembly committee hearing investigating the breach. And yet Target did not send a single representative to Sacramento today to answer questions about the largest data breach in American history?

The fact that Target didn’t show up today tells us all we need to know about how sorry Target is and how committed it is to our privacy.

If you are as offended by this as I am, I have a t-shirt for you to wear too.

The reason Target won’t face legislative questions today is the same reason that our personal financial information and data is at such grave risk: there is no price to pay. There are few financial penalties to companies like Target when our personal data is taken.  

Beyond public embarrassment, Target has little financial incentive to care.

We, the consumers, pay the consequences but we have no remedies.

According to the Committees’ own staff research, 1 in 4 consumers whose personal information that is taken becomes a victim of identity theft. 1 in 4 victims of a data breach is also a victim of identity theft. If these numbers apply to Target, that would potentially create more than 25 million identity theft victims.  

There’s a harm. The retailers had a role in creating that harm. And yet they have no liability under California law for what they have or have not done to safeguard the sanctity of our personal information.

The problem with privacy violations is that unlike thefts of money or property the law does not recognize a harm and does not provide a remedy.

As the Committees’ staff research states: consumers have no remedy under the law for the loss of financial privacy suffered through these data breaches, and the 1 in 4 risk of id theft they face.  Zero remedies.

Jamie CourtSo why would retailers invest in greater security, or meet voluntary industry standards, or move away from risky magnetic strip technology?  

If they don’t have to pay a price they don’t have an incentive to change.  And that leaves our private financial information with a big bullseye on it.

What can we do?

We need a California financial information act that mirrors our Medical Information Privacy Act.    

When there is a data breach of our medical information, the drug company, hospital or medical center is liable to the consumer for $1,000 per violation.  

Guess what?  Medical data breaches are fewer and farther between. When they occur companies pay a big price.

The same should be true for our financial data. We need a California Financial Information Privacy Act

It would:

  • Change notification standards to be immediate.
  • Write minimum-security standards into the law so that they are no longer voluntary.
  • Set limits on the time data can be retained. And limits on what information can be collected and retained
  • Most importantly: create a private right of action. Put a price tag on retailers’ mistreatment of our private financial information.

Until there is a price to pay, Target and other retailers will continue to make us targets.

If you are as offended as I am by Target’s absence today in Sacramento, please share our Target design online to show your displeasure.

When a company as big as Target won’t provide a single representative to answer questions about the largest data breach in American history, it is time for California to step up and deliver on the promise in Article 1 Section 1 of our state constitution: Privacy is an inalienable right.



Posted by Jamie Court, President of Consumer Watchdog.

AAA Gets an “F” For Dumping Agents, Leaving Customers in the Lurch

 AAA TruckTriple-A has been American drivers’ friend almost since U.S. roads linked the nation together. It has rescued families from flat tires and worse. It has planned millions of family vacations and sold well-regarded auto insurance. It has always skewed toward older drivers and welcomed their devoted renewal of memberships. Its employees got good benefits and stayed with the organization.

For all those reasons, it’s a shock to hear that-at least in Northern California-AAA is dumping senior employees like so much excess baggage, according to a lawsuit filed by 10 of them. At AAA’s California State Auto Club branch, successful veteran insurance agents report being fired or forced out and replaced with younger, cheaper hires and call center employees.

Drivers who have kept up their AAA memberships for decades should be steamed about this on principle. But there are practical reasons to be angry, especially for drivers with AAA auto, home or boat insurance.

The laid-off AAA insurance agents are the people you would have called if you had a policy question or problem with a claim. Or if you wanted to add your child to a policy. Or maybe just for advice-for instance about whether a rental car is covered or whether your auto insurance is good in Canada.

Where are you going to get that help now? Who you gonna call?

Your file would likely become a “house account,” often with no agent assigned. Maybe the call center kid can find your file, put you on hold and hunt for a manager to help him figure it out. The hourly workers answering the phone won’t know you from Adam.

If the same thing is going on at other AAA chapters, it’s not likely the public will know unless more lawsuits emerge.

Judy DuganThe “why” of these dismissals is not complicated. Insurance agents get bonuses when they sell new policies and smaller yearly payments from the insurance company as policies are renewed. The agents are expected to earn your loyalty and keep you in the fold.

The senior agents service up to thousands of policies built up by sales over the years. This takes time, so they may sell fewer new policies.

By dismissing the agents, CSAA gets to keep their yearly servicing payment.

CSAA’s bet is that you won’t care enough to endure the thrash of taking your business elsewhere. The fact that anyone laid off at age 50 is unlikely to ever find a comparably paying job? Not AAA’s problem.

Layoffs off of older, higher-paid employees are nothing new in modern corporate culture. But this is a case when the fallout also harms the customer in a direct way. It’s worth thinking about before you dial the number on the AAA insurance brochure you got in the mail.



Posted by Judy Dugan, Research Director Emeritus for Consumer Watchdog

Iron Kay — Insurance Companies Pick Fight With Wrong Family

Iron KayDan Shea’s Aunt Kay was 83, vibrant and healthy in 2011, when she suffered terrible injuries in a head-on accident. Kay spent five months in the hospital rehabilitating and being repaired with so many metal parts that the family dubbed her “Iron Kay.”

Then the real fight began-one that changed Dan, a San Diego civic booster and Republican notable, into an implacable foe of insurance company tactics. He’s told Kay’s story in a short, even charming, video, “The Iron Lady,” that calmly exposes corporations trying to outwait Kay’s lifespan to preserve their profits.

Farmers and two affiliates of Nationwide have been resisting a settlement for more than two years and counting. It’s costing the corporations a bundle, but if Kay dies before their legal options run out, they’ll save a bundle. It’s a perfectly legal tactic, which Dan is determined to change. The fight is Kay’s reason for living through her pain.

Kay will never be the same: She can’t drive and can barely walk. She’s living with family and dependent on them. But she’s fully determined to get as far back to normal as possible.

Kay expected to at least recover financial independence, even after $800,000 in hospital bills. Both Kay and family of the 17-year-old boy in the truck were very well-insured by major companies. The boy was at fault, but there was no rancor between the families.

Then they encountered the insurance lawyers. It ultimately dawned on them that the insurance companies would benefit by delaying until Kay died, to make most of their liability disappear.

Kay originally did not want to sue, so Dan asked for mediation. Farmers Insurance, the boy’s insurer, agreed but stalled for months. Then the insurers offered a ridiculously low settlement–barely over half of the medical bills, much less her ongoing medical costs. Then they stalled some more and tried intimidating Kay with a long deposition about her life since adolescence.

When the case got to court in October of last year, within a few days a jury spurned the insurers’ argument that they really owed little, and awarded Kay $2.1 million dollars.

Kay hasn’t gotten a penny. The insurance companies stalled again, and on January 7 they demanded a new trial. When it’s denied, they can file for an appeal. That could string out for a year or two.

Dan Shea found that having plenty of insurance, no matter how much it costs in premiums, doesn’t mean the company will protect you when you need it. And that everything the insurers have done is within the law.

Dan and his family have the determination and resources to keep fighting, and Dan is calling on state legislators to fix these interminable delays.

The fix shouldn’t stop at auto and property insurance. There are also horrible insurance company incentives embedded in state medical malpractice law. For instance, if an infant is severely disabled by medical negligence, insurers for the doctor and hospital could have to pay millions for a lifetime of expert care.

If the baby somehow dies, its economic value dies, too. The law in California restricts dead-child lawsuits to such a low payout that grieving parents usually can’t even get a lawyer to take their case. So what incentive does an at-fault hospital or doctor have to keep that baby alive?

The same is true if the wronged patient suffers a terminal illness-why pay now if you can stall until the problem literally goes away?

We need more people with Dan’s determination to change this.



Posted by Judy Dugan, Research Director Emeritus for Consumer Watchdog.

Keystone XL Builder Has Explosive Problems

TransCanada, the company that would build and own the Keystone XL oil pipeline from Canada’s tar sand fields to the U.S. Gulf Coast, has dialed up its lobbying in Congress after a U.S. State Department report that favored the pipeline. The giant oil pipeline is perfectly clean and safe, say the lobbyists. TransCanada will be using the best, newest technology, monitoring and materials. The citizens of Montana, South Dakota, Nebraska and points south need not worry their little heads.

Then, BOOM! A TransCanada natural gas pipeline in Manitoba, Canada blew up in a spectacular fireball on January 25, reaching hundreds of feet into the air. It burned for 12 hours and only its rural location prevented a human catastrophe. (A nearly identical gas pipeline explosion in San Bruno, California killed eight people and burned a neighborhood in 2010). A TransCanada pipeline in Ontario exploded in a nearly identical manner in 2011. Another TransCanada pipe in Ontario blew up in 2009 as well.

TransCanada ExplosionA week after the Manitoba blast, TransCanada still didn’t know what caused it, or wouldn’t say.

Oil pipelines may fail without fireballs, but are no less dangerous to neighbors and the environment. No matter what a pipeline carries, maintenance and vigilance matter. But keeping a pipeline from exploding-or gushing a lake of flammable, toxic crude oil into local water supplies-isn’t a profit center. (What would pour out of Keystone XL is actually a slurry of corrosive tar and chemical-laced, highly flammable thinners.) To a corporation, safety spending is a dead loss. Only the lip service is free.

Ronald Reagan famously said of negotiating with the Soviet Union, “Trust, but verify.” The same goes for the promises of TransCanada, yet U.S. pipeline regulators are too strapped for staff and money to verify even existing pipeline safety, according to a New York Times story.

Another TransCanada pipeline explosion in 2009, in Ontario’s northern wilderness, was blamed on “95% corrosion” of the pipe. A Canadian government report said TransCanada’s inspection tools “failed to accurately assess” the level of corrosion.

The real question about the Keystone XL pipeline is why the United States should bear all of these risks, for no reward. A Consumer Watchdog study last year found that the pipeline, by sending Canadian oil overseas from the Gulf Coast, would actually raise gasoline prices in the U.S. The number of permanent jobs created would be paltry. Domestic oil production is rising and U.S. consumption is falling, so there is no economic rationale for more tar sands oil.

The XL pipeline, with all its attendant risks of spills, pollution–even deliberate vandalism or terrorism–is being built through America but not for America.

Canadians who understand the danger are turning down proposals for oil pipelines to their own Pacific coast.

Oh, and the U.S.State Department report that TransCanada’s lobbyists are waving so proudly? It was drafted by a subcontractor with financial ties to TransCanada. Chalk up one more reason why the U.S. should decline to be TransCanada’s beast of burden.



Posted by Judy Dugan, Research Director Emeritus of Consumer Watchdog.

Dennis Quaid Calls On Californians To Support Pack Patient Safety Act

Dennis Quaid“We were lucky to have a happy ending,” actor Dennis Quaid told a crowd at Consumer Watchdog’s Rage for Justice Awards in 2009. He was talking about the near-fatal overdose that his twins experienced at birth. They were given one thousand times the amount of blood thinner they were supposed to and nearly bled to death. “Their survival was the beginning of my activism.”

Dennis received the Phillip Burton Public Service Award for the spotlight he has put on medical errors and his campaign to introduce bar coding for prescription drugs and electronic medical records into the medical system. Cedars Sinai introduced a $100 million bar coding system in response to the Quaid family.

“People started telling us their story,” Dennis said of people who approached him with their own tales of medical negligence.

Now Dennis has taken a stand for California families victimized by medical negligence. He is asking California voters to sign the Troy and Alana Pack Patient Safety Act, a California ballot measure to toughen the state’s patient safety laws.



“Troy, 10 years old, and Alana, 7, died because the health care industry has not done a good enough job keeping track of prescription medication,” Quaid said. “Their father, Bob, wrote this ballot measure to change things so other families won’t have to live through the tragedy his has.”

Dennis urged voters to watch a short, 2-minute video about Bob Pack’s courageous fight and add their signature for the Troy and Alana Pack Patient Safety Act.

More than 500,000 signatures have been gathered for the Pack Act.  More than 800,000 signatures must be turned in by March 24th for the ballot measure to be before voters in November.

“This patient safety reform can save lives,” Quaid said. “My family went through a frightening few weeks when our newborn twins received a near-fatal overdose and almost lost their lives. Since then, I have learned that patient safety is a huge problem and that the medical industry needs to learn some lessons from the aviation industry, which has a zero tolerance policy for errors.”

Patient and Consumer Initiatives Will Save Lives and Money

Originally published in the Sacramento Bee on Sunday, January 12, 2014


Jamie CourtNo political consultant sees more angles than Richie Ross, but his tangent opposing two pro-consumer ballot initiatives, which could turn 2014 into the Year of the Patient, is unsound geometry (“Voters can’t avoid health care politics,” Jan. 2). The ballot measures will save lives and money by closing fatal loopholes in Obamacare and California’s patient-safety laws.

The Affordable Care Act requires everyone to buy insurance but does not limit its cost. The “Justify Rates” ballot initiative before voters in November requires California health insurers to justify rate hikes and get approval before they take effect, as now happens in 35 other states.

The millions of individual policyholders and tens of thousands of businesses whose rates could not go up without state approval under the measure are those who have been hardest hit by premium increases over the past decade.

The ballot measure applies California’s tough property casualty insurance regulation, enacted by voters in 1988 as Proposition 103, to health insurance. A recent study by the Consumer Federation of America found the law has saved California drivers $102 billion. Drivers today pay less in real money than they did in 1988, the only state to see any decline.

The same tough rate regulation already applies to medical-malpractice insurance for physicians and hospitals, including that paid for by private clinics.

Consumer Watchdog has used the law’s protections to lower medical-malpractice insurance premiums by $77 million over the past decade. Ironically, doctors enjoy the protection that millions of Californians who pay for health insurance don’t yet have.

That’s why arguments that the Troy and Alana Pack Patient Safety Act, now circulating, will raise malpractice rates are phony.

This ballot measure will save lives by curbing substance abuse by doctors, stemming the tide of overprescribing, and updating a 38-year-old cap on victims’ recovery that prevents injured patients from getting justice.

The California Medical Board estimates that 18 percent of doctors have a drug or alcohol problem during their careers. Mandatory drug testing, as now applies to most other public safety professions, will prevent dangerous doctors from practicing. Updating our medical-malpractice laws will allow victims of drugged, drunk and dangerous doctors to get justice.

One quarter of all medical discipline in the state involves abuse of drugs or alcohol. The Pack Patient Safety Act will protect the victims of this abuse and their families from the third leading cause of death in America: medical malpractice.


Jamie Court, proponent of the initiative requiring public justification of health insurance rates, is president of Consumer Watchdog. Carmen Balber is the nonprofit group’s executive director.

Lessons From The Cancellation Crisis

Jamie CourtAn analysis just released by California’s health insurance exchange, Covered California, offers the first real insight into the depth of the Obamacare cancellation crisis.

About 450,000 of the 900,000 cancelled California policyholders will see rate hikes, according to the analysis released by Covered California.  That’s 50% of all cancelled Californians who will be paying more.

Most strikingly, half of those cancelled policyholders are getting policies that are little different from the ones cancelled, deemed by Covered California “comparable policies. ”   In other words, half of cancelled California policyholders are paying more, in some cases a lot more, for policies that are worth no more under the Affordable Care Act. Covered California reports the other half – 225,000 — will pay more for better benefits since they had “Thinner Plan.”

Despite the ugly stats, the Covered California’s board of political appointees voted to block President Obama’s call for extending cancellations for another year.  The Covered California contracts with health insurance companies, written at the insurers’ request, required them to cancel the 900,000 Californians. Thursday the board of political appointees refused to reverse course, arguing that would create more problems.

The happier headline Friday that 360,000 Californians have applied for coverage with California Covered is little surprise given that 900,000 policyholders have nowhere else to go because of its actions.   And that was the point of the cancellations – drive the individual policyholders into Covered California’s pool.

The problem is that pool has premiums that are much higher than what they should be and doctor and hospital networks that are much too small.  Cancelled policyholders would care less if they had comparable prices and comparable benefits.  And that’s what reformers should be fixing, rather than defending as reasonable.

35 states have rate regulation but not California. So benefits and premiums will continue to be out of whack until voters set the insurance industry and its political allies straight through a ballot measure next November, which requires approval by the elected insurance commissioner for rate hikes and benefit changes.

Cancelled Plans

The Covered California analysis shows that 35% of cancelled policyholders will get subsidies for policies, so they will get rate relief under the Act. That doesn’t mean taxpayers aren’t paying too much for those policies, only that low income consumers are getting help.

The analysis, by one of the biggest boosters of the ACA, discredits an argument among other boosters that is troubling: why do we care that cancelled policyholders are losing ‘junk insurance.”

Our consumer group supported the ACA, and its research and education inspired its bans on junk insurance, preexisting condition limitations and medical underwriting.  The fact is, however, that cancelled policies in California are, by and large, not junk.   Their physician and hospital networks under old policies are far broader than under the Covered California plans. Of course, no one is watching, since our insurance commissioner has no power over prices.

Rate regulation is one answer, but until the 2014 election, when California voters can make that change, backers of the ACA also have to stop insisting its policies are always better, even if they cost more and cause doctor dislocation. That just won’t fly with a public that knows far better. Californians know when their doctors are not in the networks in the new plans and their premiums are higher.

If we want to save the ACA, then we better make it work. That includes acknowledging its flaws and trying to make them better.

In a state like California, without rate regulation and with much ACA support, it’s unthinkable that Covered California would buck the president and California Insurance Commissioner Dave Jones’ call for a reprieve on cancellations when its own numbers show 450,000 are paying more under the ACA.

It’s the continuation of a troubling logic that you are either for the ACA, and the relief it extends to 48 million uninsured, or against it. That type of reasoning will alienate the middle class, which is largely without subsidies and facing a real crisis in cost in states like California. These policyholders need relief too. And that means bucking the insurance industry, something its business partners at Covered California seem completely unwilling to do.

If the most ardent backers of the ACA don’t start to think like average citizens, there’s little reason to believe the vital center and muddled middle will continue to support the ACA.  It’s time to wake up and smell the rate hikes and insurance company shenanigans for what they are – wrong, plain and simple. Then we can work together on fixing them.



Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.