By Pacific Coast Business Times Staff Monday, April 5th, 2010

Thanks to a law firm’s $10,000 contribution to an assemblymember’s campaign for Insurance Commissioner, a Santa Barbara agent’s crusade to get small-business coverage looks like one more piece of political theater in a tough election year.

On March 23, Brent Anderson filed a complaint with the California Department of Insurance against Blue Shield of California that had the makings of a David vs. Goliath struggle.

Blue Shield terminated Anderson’s broker agreement and forced the Carpinteria Summerland Fire Protection District, a client, to switch to a higher-cost health plan, the complaint alleges. Anderson claimed the actions broke state law by preventing a small employer from accessing a low-cost health plan.

The petition was filed the same day that President Obama grabbed headlines for signing the nation’s mammoth health care overhaul. It arrived on the desk of current Insurance Commissioner Steve Poizner, a Republican seeking the governorship.

The law firm that filed the complaint, Roxborough, Pomerance, Nye and Adreani of Woodland Hills, launched a public relations blitz to spread the word.

That push included a press release with a forceful quote from Assemblyman Dave Jones, a Democrat from Sacramento who has taken the lead in publicly grilling insurance companies. Jones has raised $182,000 in his bid to succeed Poizner — including a hefty chunk from the law firm that wrote the March 23 press release.

“The allegations leveled against Blue Shield — that they are prohibiting small businesses from using employer-funded health reimbursement arrangements to provide health insurance to their employees — are very troubling,” Jones, the chairman of the Assembly health committee, was quoted as saying in the release. “Limiting California’s small businesses from taking advantage of employer-funded tax programs to provide healthcare to employees is simply wrong.”

Not disclosed in the statement was the fact that two months ago, Roxborough Pomerance donated $10,000 to the Jones campaign. Asked about the timing of the complaint and the press release, attorney Michael Adreani said politics didn’t enter the equation. “It’s not bent one way or the other politically,” Adreani said. “These small employers in California are being creative. They’re doing things in order to get employees covered.”

Chris Shultz, a spokesman for Jones, said in a statement that the assemblyman has fought insurance companies on behalf of consumers and small and mid-sized businesses “regardless of whether they support him or not.”

Herb Gooch, a political science professor at California Lutheran University, said the timing of the donation to Jones’ campaign and the Roxborough Pomerance press release looks like more than a coincidence. “All the pieces seem to suggest there’s an agenda here to get attention paid to insurance and therefore to the [insurance commissioner] race,” Gooch said. “It does suggest there is a pattern to help a campaign. This sort of stuff is done all the time.”

Andreani said his firm’s press release also contained a quote from Assemblyman Chuck DeVore, an Irvine Republican. DeVore has launched a 2010 bid against U.S. Sen. Barbara Boxer, D-Calif. It doesn’t appear Adreani’s firm gave any money to DeVore.

Anderson, the Santa Barbara insurance agent, said he didn’t know Roxborough Pomerance had contributed to Jones. He said he sought the attorneys last fall because they had experience in the insurance industry and Adreani had once worked for the Department of Insurance. Anderson had tried to save the Carpinteria Summerland Fire Protection District money by tapping a high-deductible policy paired with a fire-department-funded “wrap plan” to help employees deal with the deductibles. The high-deductible plans have the cheapest rates.

But Blue Shield, along with other major insurers, doesn’t allow wrap plans with its lowest-cost plans. It requires the use of employee-funded health-savings accounts to deal with high deductibles or that wrap plans be used with higher-cost policies.
“If you allow wrapping of deductible funding, it essentially destroys the assumptions that went into creating the rate,” said Blue Shield spokesman Aron Ezra. “If an employer funds that deductible fully, the person no longer has an incentive to ration when they get care or how they get care,” he said.

Blue Shield must charge higher rates for those plans because it ends up spending more on them, Ezra said.

Steve Fratus, a client executive with insurance firm Barney & Barney in Oakland who is not involved in the complaint, said Anderson’s strategy with the Carpinteria Summerland Fire Protection District appeared unusual. Wrap plans and health-savings-account strategies have been around for several years, and their rules and rationales are well-understood in the industry, he said. “If you’re spending somebody else’s money, you’re not going to care how much you use,” Fratus said.

Adreani, Anderson’s attorney, said the existence of HSAs, as the accounts are called, doesn’t negate his claim that Blue Shield’s policy violates the state insurance code. “The insurance code is very clear. It says you have to offer [plans] fairly to small employers,” Adreani said. “The word access is used. [Blue Shield’s plan] is not marketed fairly. You can’t cherry pick.”

Caught in the middle of the dispute over state insurance policy is Mike Mingee, fire chief of the Carpinteria Summerland Fire Protection District. He spent the better part of two years trying to cover his 37 employees without breaking his budget. He decided to stay with Blue Shield to avoid the learning curve of switching to another insurer but estimates his new plan costs about $100,000 more than the old one.

“Whether private or public, everybody is struggling to pay their bills now,” Mingee said. “Being a special district, the well is only so deep. We’re funded 96 percent from property taxes. As employee costs go up, I have to look at operations and take it all out of that general fund.”

Anderson, a 40-year veteran in the insurance business, said his complaint is not about him but about the 1.1 million small businesses in California struggling to control health-care costs. “It’s just not right for the insurance companies to deny them access to these affordable plans,” Anderson said.

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