Scottish poets from the 18th Century are rarely credited for their insights into California politics. Yet the architects of Proposition103, California’s 25-year-old attempt to rigidly control prices in the state’s insurance market, would have done well to heed the insight of Robert Burns as they crafted their lamentable brainstorm and sought to leave no angle unaddressed.
In proving foresight may be vain:
The best laid schemes o’ mice an’ men
Gang aft a-gley, [often go awry]
Not unlike Burns’ “mice”, their foresight had its limits.
In an obscure section of the California Insurance Code inserted by Prop 103 lies a provision that inadvertently bucks Prop 103’s otherwise unifying trend, in that it doesn’t hurt California consumers. It is a provision that allows groups to negotiate collectively with insurers to achieve discounts based upon their shared characteristics. This is a good idea, because certain groups have better loss experiences than other policyholders and should pay lower premiums as a result.
The people who receive discounts under this provision are referred to as “affinity groups.” To date, the California Department of Insurance has approved rating plans that include affinity groups.
In spite of the fact that the rates charged to affinity groups enjoy the blessing of the CDI, the authors of Prop 103, Consumer Watchdog, are up in arms. Their complaint is that groups they don’t fancy are receiving lower premiums than they otherwise would on a differentiated basis. The groups who are receiving benefits, in the words of Consumer Watchdog, are:
…college graduates who can afford to maintain memberships in an alumni association, people with high paying jobs like doctors, lawyers, and business executives, and other elite members of the 1%.
That politically charged and polarizing class-driven characterization might come as a surprise to the elderly fixed-income AARP members who enjoy more accurate rates. It might also surprise the public-spirited teachers, public safety professionals and members of the military who enjoy affinity group status, since they don’t typically identify as members of the 1 percent.
But those inconvenient truths complicate a simplistic narrative that does more to obfuscate than it does to enlighten. As is often the case, an intentionally partisan and misleading surface-level discussion of who is “deserving” of what rate belies more problematic issues.
First, narrowing the regulatory definition of “group” will deny consumers an opportunity to enjoy rates that more accurately reflect their level of risk – rates that are often lower than what they currently pay.
Second, and not without some irony, attempting to promulgate a definition of the word “group” that meaningfully changes the scope of Prop 103 via the administrative rule-making process violates the very language of the initiative. Instead, to make this change, it is necessary to appeal to either the Legislature or directly to the people.
Bereft of both a sound policy rationale and the governing authority to make this change via administrative action, the ongoing controversy surrounding affinity groups only makes sense in the light of a profound historical embarrassment. The best-laid plans of Prop 103’s drafters, to gain an inimitably complete level of control over California’s insurance market, has gone awry through an action of their own.
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