California Commissioner Sends Letter to Former Commish

Editor's note: This is a letter from California Insurance Commissioner Steve Poizner to Lt. Gov. John Garamendi regarding Prop 103.

Dear Lieutenant Governor Garamendi:

"I write in response to your letter of May 1, 2008 in which you comment on recently announced changes to the Proposition 103 prior approval rate regulations.

Given that your letter was received by the press corps before I received a copy, I can only conclude that it was a press release written in the first person. Nevertheless, it contains some issues that are worthy of response.

You state that although you have not had "adequate time to completely analyze the impact of these changes[,] I am certain that you have opened the door to abuse by insurers" and "undermine[d] the law in significant ways." In other words, you haven't fully analyzed the changes but have nevertheless concluded that they are bad. I applaud your candor in admitting that you are acting in ignorance. Rest assured that I will give your comments commensurate consideration.

You classify these regulations as "important consumer protections" and treat them as almost sacred. This is interesting. You served as Insurance Commissioner twice. If these regulations were so important, why is it that you failed to implement them over two terms as Insurance Commissioner in a period that spanned 16 years? Why did you wait until after the November 6, 2006 elections, when you were leaving office, to submit them? Is it because (a) they weren't really that important to you; (b) you weren't all that interested in protecting consumers; (c) you didn't want to be saddled by regulations that weren't workable? It's a multiple choice question - and there may be more than one right answer.

Let's look at the bigger picture. The prior approval regulations were but one of 16 sets of regulations that you unceremoniously dumped into the Office of Administrative Law after the 2006 election. Like so many of these last minute efforts, the prior approval regulations were not fully baked. It is clear that your rush to submit them was more about legacy building and partisan politics than good public policy.

In my campaign for Insurance Commissioner, I committed to implementing the prior approval regulations because I recognized that your alternative for two terms in office was to rely on underground regulations. It took more than a year of constant revisions, workshops, dialogue with interested parties, diligent work of Department staff and the issuance of emergency regulations to make your regulations "workable." There is still more work to be done - and I intend to do it. Consumers and insurers both deserve a process that is effective, efficient and transparent. Regretfully, this is far from what you left me.

You concede that interested parties may not have found your regulations "to be ideal," but assert as a defense "they could not mount a meritorious legal challenge" to change or dismiss them. It is clear that we hold different opinions as to what constitutes good public policy. I believe that good public policy must do more than simply pass legal scrutiny - it must work.

Proposition 103 requires the Commissioner to ensure that rates paid by consumers are not "excessive.I've got that one down. (If you have any doubt about this, give Allstate a call.) But the Commissioner must also be concerned about the health, vibrancy and competitiveness of the insurance market. It is essential that we foster an environment in which insurers want to compete and expand. If such an environment does not exist, consumers will be hurt in the form of reduced choices and higher prices. The regulation you left me was flawed because it ignored this fundamental principle.

For your information, the changes made to the prior approval regulations will make the process more transparent, expedite the rate application/review process, provide the Commissioner with the ability to approve lower rates and have them taken to market faster. Each of these benefits consumers.

I have worked diligently to ensure that insurance rates are as low as possible, as is evidenced in the more than $1 billion in reductions that have occurred on my watch. I have taken numerous enforcement actions against insurers that have not met their obligations to consumers (which, again, a call to Allianz, Blue Shield or United Health would certainly confirm). We have negotiated concessions from insurers to help those impacted by fires and worked with local law enforcement to arrest more than 1,000 perpetrators of insurance fraud. I have also worked to streamline or eliminate unnecessarily burdensome regulations that created problems far greater than those they sought to address. And I have done so by working with all interested parties.

In closing, I note that you repeatedly use the word "disappointed" in regard to the manner in which the Department and I have addressed this issue. I, too, am disappointed. I am disappointed that the work product you left behind was flawed and needed to be fixed. But, even more so, I am disappointed by the cavalier attitude you display in making inflammatory pronouncements about changes you admit that you have not reviewed. The public deserves better."