Secretary Kathleen Sebelius announced today that HHS awarded $46 million in grant funds to 45 states and DC to "help states crack down on unreasonable health insurance premium hikes." But are all 46 of those insurance departments really planning significant improvements in rate regulation? How much new protection will consumers gain from double-digit premium increases?
The health reform law requires HHS to review and publicize "unreasonable" rate increases, but gives HHS no authority to modify or deny those rate increases. That’s a job left to the states. So the first measure of whether these grants will help the states protect consumers is whether or not they have the power to reject unreasonable, excessive or unjustified rates.
Even after $46 million in grant money is spent, the answer varies state to state.
Every state is starting from a different place. Only about 17 states currently have the authority to review and approve, deny or modify insurance rates before they go into effect for most insurance plans.
Still, according to HHS and the grant applications, just 9 states plan on expanding their prior approval authority. In fact, of the 15 states that currently have NO authority to reject rate increases at all, only four of them intend to seek prior approval authority from state legislatures. Kudos to Illinois, Louisiana, Mississippi and Montana.
About 19 other states have limited authority to deny rate hikes — for example, they can deny an individual rate hike but not those proposed for small businesses — and five of those are seeking expanded authority. Still, when these grants are paid in full (and there’s $200 million more in the
pipeline), some states will still have zero power to act when insurers
impose unreasonable rate hikes. What’s the point of hiring math whizzes to scrutinize insurers’ books if, no matter what the actuaries find, states can’t do anything to change rates?
It’s a real disappointment that proposals from states that are actively fighting real oversight got the same $1 million given to states with a genuine commitment to rate regulation.
In California, where Governor Schwarzenegger wrote his proposal to kill prior approval regulation, the companion legislation to his grant application actually says that if a rate is found to be unreasonable, unjustified, or just plain inaccurate, the most that regulators may do is to publish that information online.
The bully pulpit can be powerful, but at the end of the day a public shaming is rarely enough to convince companies to lower premiums and treat consumers fairly when their Wall Street investors are clamoring for ever-increasing returns. Regulators must have the authority to reject rates and protect consumers, especially now that every American will be required to have health insurance by 2014.
A second potential game-changer in the grant applications is how they propose to facilitate consumer participation in rate regulation. Public intervenors are a key component of property-casualty insurance regulation in California, where Consumer Watchdog has saved policyholders over $1.7 billion in auto, homeowners and medical malpractice premiums by challenging excessive rate proposals.
A dozen or so states have proposed innovative new ways for consumers to participate in the rate review process. These include:
• Public hearings on rate increases in Colorado, Illinois, North Carolina, Tennessee, and Wisconsin;
• Funding for consumer organizations to participate in and facilitate public comments on the rate review process in Maine, Rhode Island, and Oregon; and,
• Promising-sounding consumer voices in insurance departments, including a consumer ombudsman in Oklahoma, a "consumer advisory" council in North Carolina and Arkansas, and a "consumer advocate for health insurance consumers" in Nevada.
Still, transparency is never enough. States like Delaware and Utah, where they’re proposing public hearings but aren’t seeking authority to reject or modify unreasonable rates, need to do more.
Of the five states that didn’t apply for a grant at all, some (Iowa) think they’re doing a fine job already and didn’t need the federal money. Others (Alaska, Georgia) are in the middle of fighting the health care law in court. Minnesota and Wyoming round out the five.
All this from our first perusal of the HHS summary of the grant awards, and the original grant applications we were able to obtain from 20 states. Since that feat was achieved only through a tireless phone campaign by a Consumer Watchdog intern, we hope HHS, and the many states that refused to provide the applications without the delay inherent in a formal public record or Freedom of Information Act request, modify that stance now that the awards have been announced.