After meeting with health insurance executives two weeks ago, President Obama reiterated an oft repeated promise: "The CEOs here today need to know that they’re going to be required to publicly justify unreasonable premium increases."
It’s been a common refrain from those proponents of reform who understand the public is fed up with unjustified double-digit rate hikes, and it is has only gained validity in the wake of revelations that two recent rate hike requests, by Anthem and Aetna in California, contained "substantial mathematical errors" that resulted in substantially inflated rates.
In my mind, "justify" means a thorough, reasoned explanation, with data to back it up. It’s pointless if insurers can get away with a pro forma repetition that increasing costs force them to charge higher premiums. What costs? Justification demands real numbers. Are executive salaries through the roof? Did profits double? Are insurers projecting medical cost increases based in fantasy or reality?
The NAIC is currently drafting the form that insurers will use to justify premiums that are found "unreasonable." (Download it and let me know if you think it explains anything.) In its current iteration, the form’s way too vague for even an informed consumer advocate to determine if a proposed rate increase is justified.
HHS and the White House should weigh in and make clear that this disclosure is meant to provide the public with the tools necessary to decide for themselves whether a rate hike is justified. It’s been proven that we can’t just take health insurers’ word for it.
At the end of the day, regulators need the authority to review and approve, or reject, any rate hike – otherwise justifying rates may amount to little more than a public shaming. Because the health reform bill failed to require states or HHS to act, the ball is back in lawmakers’ court. California’s bill to require prior approval of all health rate increases is on deck in the state Senate.