CHICAGO, IL — Illinois regulators will ask lawmakers for the authority to approve or deny health insurance rate increases, saying residents need protection from skyrocketing costs that aren’t justified.
Currently there is nothing the state can do to stop rate increases, no matter how excessive, a situation that leaves thousands of residents scrambling to pay or risk losing their coverage.
"We’ve heard of companies increasing rates at just explosive levels, at abusive levels, and telling (policyholders) they’re increasing rates because of health reform," Illinois Department of Insurance Director Michael McRaith told The Associated Press. "We don’t have any authority to do anything about it."
Illinois received 186 complaints about rate increases from 2008 through 2010, according to an application submitted by the state insurance department for a $1 million federal grant that it says would enhance its efforts at oversight. McRaith said some people have complained of increases of up to 100 percent per year.
The grant, which may be announced Monday, would help the insurance department put more muscle in its rate review system, whether or not state lawmakers agree Illinois regulators should have a say over increases.
Among recent rate increases reported to state regulators:
In May, Michigan-based American Community Mutual Insurance Co. told Illinois regulators it was raising rates on one health policy by 83 percent, following a 20 percent increase the previous December, saying it needed the increase to cover claims.
AXA Equitable Life Insurance Co. notified the state in May of a 25 percent rate increase on a health plan that had been increased by 25 percent in 2008. Company spokesman Chris Winans says AXA no longer sells health insurance but has old policies covering fewer than 200 Illinois residents.
In late 2009, Prudential Financial Inc. reported a 60 percent rate increase on a policy that covers only about five Illinois residents; that same policy had been increased by 20 percent the prior year.
Medical inflation and the recession, which is forcing healthier people to drop coverage, are pushing up rates in the individual market, where the self-employed and others who aren’t covered by their employers shop for health insurance, the industry says. Some insurers told the AP they’re exercising restraint and should be raising rates even higher.
"If premiums are not allowed to keep up with soaring medical costs, it could put at risk the coverage families and employers rely upon," said Robert Zirkelbach of America’s Health Insurance Plans, the main industry lobby.
He said the industry opposes arbitrary caps on premiums, and if Illinois adopts rate approval, it should be based on objective criteria "to avoid a process that becomes arbitrary and politicized."
All insurance companies licensed in Illinois are for-profit, and state law doesn’t require them to tell policyholders in advance about rate increases. It also doesn’t restrict what premiums can be charged to individuals or employers with more than 50 workers. Smaller businesses have slightly more protection because state law limits how much premiums can vary from the norm.
"Families and employers in our state pay a lot of money for health insurance," McRaith said. "They should have some level of certainty when they pay their premium dollars that they’re getting health care in exchange."
McRaith said he’s certain he’ll be able to find lawmakers to sponsor a bill giving his department the authority to approve or deny increases, just as about 25 other states do.
The new national health care law which will require most Americans to have health insurance by 2014 or pay a tax penalty included $250 million for states to improve their health insurance rate review systems. The federal government is expected to award the first of the grants soon.
Illinois’ 81-page request portrays the state’s current health insurance rate review system as ineffective and toothless, noting that the insurance department devotes just $80,000 a year to reviewing rates out of a $40 million annual insurance department budget and that a department staffer spends no more than an hour on each rate filing.
The state’s effort to push for more aggressive oversight is "a huge step forward," in protecting an estimated 3 million residents covered by state-regulated policies, said Carmen Balber, director of Consumer Watchdog, a nonprofit, nonpartisan organization that monitors how states regulate insurance rates.
"We’re talking about a product that in just a few years every American will have to have," Balber said. "With skyrocketing costs and mandatory coverage, regulators have to act to protect consumers from what would an unaffordable requirement."