Ready for Reform? Health Insurance Regulation in California Under the ACA

Kelch Associates


This is archived content, for historical reference only.

California’s unique health insurance regulatory structure has evolved over decades based on political, policy, and marketplace dynamics. Oversight of health coverage is divided between the California Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI), which have unique statutory histories, administrative structures, and legal frameworks. This dual structure contributes to consumer confusion, government and insurance carrier administrative burdens, and difficulty in monitoring what is being bought and sold in the insurance marketplace.

The federal Affordable Care Act (ACA) enacts sweeping changes to the way health care services are purchased, delivered, and regulated. The ACA, and the implementation tasks facing California, provide an opportunity to re-examine how California regulates health coverage.

This report, Ready for Reform? Health Insurance Regulation in California Under the ACA, informs a discussion about health insurance regulation in California and the policies, structures, and new responsibilities needed to implement the ACA. The report suggests criteria by which to assess health insurance regulatory reform and presents two options for California: (1) consolidating into one regulatory agency or (2) institutionalizing coordination and consistency between the two agencies.

The criteria include improving the consumer experience, ensuring transparency and accountability, ensuring consistent interpretations of federal law, evaluating potential system costs and savings, and building on the strengths of the existing regulators.

Option 1: Consolidation

The report notes that the most efficient way to address regulatory duplication and confusion would be to consolidate health insurance oversight in one department or agency. The authors point out that such consolidation would require significant analysis and comparison of the statutory and regulatory purviews of each department, as well as the legal, operational, and organizational changes necessary to combine regulatory jurisdiction.

Option 2: Institutionalize Coordination and Consistency

If California continues to have two separate health insurance regulators, the report notes, policymakers should consider policies and strategies that promote greater consistency and cooperation between CDI and DMHC. It outlines options to accomplish this goal in the context of ACA implementation.

The complete report is available as a Document Download.