OLDWICK, N.J. –Since the passage of U.S. health care reform, battles have erupted in some states between insurance commissioners and health insurers over double-digit premium rate increases sought by insurers on members in their individual and small group health plans.
Some fights are being waged in the battleground states of California, Massachusetts and New Mexico. The issue, in large part, has become a political hot potato, some say.
With more talk at the federal level about the need for oversight of excessive rates, insurance commissioners are interested in showing that they are acting to protect consumers, said Carmen Balber, director of the Washington, D.C. office for Consumer Watchdog.
Some commissioners have raised the profile of disapprovals because "it’s an easy target for them to make hay with," said J.P. Wieske, acting executive director of the Council for Affordable Health Insurance.
Under the far-reaching reform law, insurers will be required to justify certain increase proposals considered "unreasonable" by state regulators and the U.S. Department of Health and Human Services, though that’s still being defined.
Insurance departments are scrutinizing premium rates because consumers "have reached their breaking point," said Balber. Complaints are rolling into departments from consumers who cannot pay "the outrageous prices" insurers are charging, she said.
"There’s no doubt that there’s more attention being focused on the process by which rates are either approved or not approved within various jurisdictions," a consequence of the Patient Protection Act, said Oklahoma Insurance Commissioner Kim Holland.
But premiums are going up because medical care costs are going up — and the law does not address these skyrocketing costs, said Holland, secretary-treasurer of the National Association of Insurance Commissioners and a member of its health and managed care committee.
"Until we get a grip on medical care costs, all of the regulation and rate evaluation in the world is not going to stop insurance premiums from going up," she said.
Another factor is that the law mandates that every person buy insurance starting in 2014, said Balber. "That makes a big difference when you are talking about a product that is unaffordable so you go without… and a product that’s unaffordable but now you’re required to purchase."
Insurers are concerned about parts of the law that take effect this year that require guarantee issue for children and extension of coverage to age 26 — without the mandate, Holland noted.
The cost of compliance with the numerous regulations now and in the future will be "enormous" for many companies, Wieske said. To some degree, they’re raising rates "on what they are expecting, cost wise."
Earlier this year, Anthem Blue Cross, a unit of WellPoint Inc., withdrew its request to raise premiums by up to 39% on members in its individual health plans in California after the insurance department found "substantial errors" in its rate filing. Commissioner Steve Poizner sent the company’s rate filing to an outside actuary for review.
California "is exhibit A on why we need oversight over insurers," said Anthony Wright, executive director of Health Access California. Many states have some form of rate review, but many don’t, including California, he said.
State regulators only have the power to disapprove rate increases given them by state law, Wright said. Some regulators "can choose to aggressively use that authority, or not," he said.
Pressure is on state regulators to assert their authority over rate increases and a demand for additional accountability is occurring, Holland acknowledged. However, they are focused on their No. 1 obligation to policyholders: ensuring solvent insurers, she said.
Many state laws require individual or small group insurance rates to be approved by state insurance commissioners before they go into effect, called prior approval, said Balber. Others states are "file-and-use," where insurers file rates and they go into effect but regulators can reject them after the fact.
In the individual market, 29 states and the District of Columbia use prior approval, while 11 states, including California, have file-and-use.
While laws vary from state to state with regard to how insurance is regulated, commissioners are generally afforded discretion to protect the citizens within their jurisdictions, Holland said.
In Massachusetts, in April, several insurers, including Blue Cross and Blue Shield of Massachusetts, sued the state over its rejection of most of their proposed increases in their individual and small-group health rates. The Division of Insurance declared the proposed rates excessive, and Commissioner Joseph Murphy used an emergency regulation to disapprove the filings.
The division disapproved 235 of 274 rate filings on April 1 — "the first disapprovals in at least 30 years," said Jason Lefferts, a spokesman. The emergency regulations went into effect in February that created a 30-day review period, according to Lefferts. The final regulations now in effect mandate a 90-day review period and outline the information required to be in the filings.
In New Mexico, Blue Cross and Blue Shield of New Mexico last month petitioned the state Supreme Court to bar the acting insurance superintendent’s suspension of a settlement that allowed it to raise premiums an average of 21.3% on members in some of its individual health plans (BestWire, June 29, 2010).
Overall, Holland said filings are reviewed for their compliance with the law and concerns or compliance failures are raised with companies during the review process. Issues with rates are addressed by the company and, in some cases, a proposed rate is withdrawn or revised before it is "disapproved," she said.
(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])