Putting the Brakes on Health Insurers

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The following op-ed commentary was published in the Los Angeles Times on Tuesday, October 19, 2010.

Obama should forbid premium hikes until the companies comply with pricing provisions of the new federal law.

Health insurance companies have declared war on President Obama’s healthcare plan.

They are sending letters to policyholders announcing big premium increases and pointing the finger at the federal healthcare overhaul. Some insurers are refusing to sell individual policies for children because of rules requiring them to take all comers, not just those in perfect health. They are lobbying on Capitol Hill and in statehouses to undermine or eliminate the law’s provisions.

Secretary of Health and Human Services Kathleen Sebelius answered insurers’ scare tactics by saying she would have “zero tolerance” for such behavior, but the administration’s response so far has been limited to words.

It’s time the president uses his clout and fights back.

Obama should – and can – issue an executive order freezing all health insurance premium hikes until the companies comply with pricing provisions of the new federal law.

Under the federal healthcare reform law, Congress expressly provided that health insurance companies cannot raise insurance premiums until insurers “submit to the [Health and Human Services] secretary and the relevant state, a justification for an unreasonable premium increase prior to the implementation of the increase.”

Facing a recalcitrant industry, the Department of Health and Human Services is working to finish regulations by the end of this year defining an “unreasonable premium increase.” Until then, it’s not possible for regulators to determine which premium increases require a public justification from insurers. So an executive order freezing premium increases until this standard is set is needed to implement the express requirements of the law.

The struggling middle class cannot afford more double-digit premium hikes, and federal law says we are owed an explanation before having to pay them. Yet on Oct. 1, many of America’s largest health insurers hiked premiums without a word of justification. The insurers owe the American people more than “it’s the White House’s fault.”

Our years of experience as policy advocates focused on keeping insurance companies honest and protecting patients have shown that bold action, not halfway measures, gets corporate attention.

There is also precedent for the success of this type of rate freeze. In California in 1988, voters passed Proposition 103, landmark insurance reform that froze auto insurance premiums until insurers complied with the law’s rules and price rollbacks. Courts upheld the freeze, and the insurance reform ultimately proved to be the most successful in U.S. history. Drivers saved $62 billion on their auto insurance thanks to Proposition 103, according to a 2008 analysis by the Consumer Federation of America, and the state has the fourth most competitive auto insurance market in the nation.

Obama should take note of California’s example for another reason. It was the state’s requirement that all drivers buy auto insurance that sparked the voter revolt for insurance reform.

Congress’ decision to require that Americans buy health insurance by 2014 without giving the government the power to set a fair price, only to require justification, is likewise a potential disaster that the president cannot afford to ignore.

A Kaiser Family Foundation poll in August found that 7 in 10 Americans have an unfavorable view of the mandatory health insurance provision. After exposure to arguments about positive benefits of the mandatory law, support rose to only 42%.

Obama needs to wake up to the fact that Americans don’t want to be told by their government to buy private insurance policies with no lid on prices.

After a temporary price freeze, the White House should then fight for real rate regulation that gives all state governments the power to reject unreasonable rates. Congress may not be able to pass such a law, but Obama can help his allies use the ballot measure process available in 24 states and the District of Columbia to give regulators the ability to stop unnecessary premium increases. He can also encourage the development of state-based public options to the private insurance market. The president has the power and the pulpit. He should use them.

Obama made the mistake of capitulating to the insiders in Washington when he reversed his campaign position and agreed to include a health insurance mandate in his reform law, without a cap on premiums. He now has the opportunity to defuse the ticking time bomb of outrageous health insurance premiums that everyone will be forced to pay, but only if he thinks like an outsider again. That could save policyholders a lot of money, and maybe his presidency as well.

Jamie Court is the author of “The Progressive’s Guide to Raising Hell: How to Win Grassroots Campaigns, Pass Ballot Box Laws, and Get the Change We Voted For” and president of Consumer Watchdog. Carmen Balber is Consumer Watchdog’s Washington director.

Consumer Watchdog
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