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Democrats seek greater control over health insurance rates
Legislation would allow federal regulators to step in to stop premium
increases when state agencies fall short.
By Noam Levey, Los Angeles Times
April 21, 2010
Reporting from Washington
Congressional Democrats have begun pushing legislation giving government
regulators greater authority to block big increases in health insurance
premiums, kicking off what is expected to be a years-long process of revising
and expanding their major healthcare overhaul.
The move, which comes less than a month after President Obama signed the
healthcare legislation, is aimed at giving all states the power to stop premium
hikes deemed excessive and allowing the federal government to step in if the
states don't act.
"This is a gaping hole in our regulatory system, and it is unacceptable,"
Senate Health Committee Chairman Tom Harkin (D-Iowa) said Tuesday as he opened a
hearing on the proposed change to the healthcare bill, the first since the
legislation was enacted.
Responsibility for regulating insurers has traditionally fallen to the
states, but insurance commissioners' ability to control rate hikes currently
varies widely from state to state. Senior Democrats on Capitol Hill, backed by
Senate Majority Leader Harry Reid of Nevada and House Speaker Nancy Pelosi of
California, are exploring ways to standardize that authority.
Reid is talking with California Sen. Dianne Feinstein, a leading proponent of
the additional regulation, about ways to attach the proposal to a piece of
legislation already moving through the Senate, according to a senior Democratic
aide on Capitol Hill. That could sidestep expected opposition from
Republicans.
Republican lawmakers and insurance industry leaders say the push for more
regulation will not address rising medical costs, which many experts say are
helping drive up premiums.
"Health plan premiums are a symptom, not a cause of the problem," said Karen
Ignagni, who heads America's Health Insurance Plans, the industry's
Washington-based lobbying arm.
Republicans, meanwhile, are urging less regulation, which they say will
foster greater competition and control premiums. "It is barking up the wrong
tree," Sen. Lamar Alexander (R-Tenn.) said of the Democratic proposal.
But consumer groups and many Democratic lawmakers believe more oversight is
needed at a time when many insurers are increasing their profits by pushing
double-digit premium increases such as the ones Anthem Blue Cross has proposed
in California.
Tuesday, Minneapolis-based UnitedHealth Group, one of the nation's largest
insurers, reported that its first-quarter profit rose 21% compared with last
year, hitting $1.19 billion.
"People say, eGreat, you passed this big bill. But we are seeing these giant
rate increases. What are you going to do about it?' " said Rep. Jan Schakowsky
(D-Ill.), who is pursuing more regulations with Feinstein.
Under the new law, the secretary of Health and Human Services is limited to
working with state regulators to develop a process for reviewing proposed
premium increases to determine whether they are "unreasonable," a standard that
is still being defined.
Insurers that propose such hikes will be required to post justifications on
their websites.
The healthcare law would also require insurance companies for the first time
to dedicate at least 80% of their premiums to paying medical claims. The
requirement will be 85% for plans serving large employers and other large groups
of customers.
This reduces the proportion of companies' revenue that can go to
administrative expenses, such as executive salaries and stockholder dividends,
which some analysts think could restrain premium growth.
Insurance commissioners in some states have the power to go further and
actually block rate hikes if they deem them excessive or unjustified.
But insurance regulation varies widely from state to state, and some state
regulators do not even require health insurers to publicly disclose proposed
premium increases. Others, such as Illinois, conduct only the most cursory
review of most proposed changes.
"Our department needs additional tools," Michael T. McRaith, who heads the
Illinois Department of Insurance, told lawmakers Tuesday.
In California, the state insurance commissioner, who is in the process of
reviewing Anthem's proposed hikes, is limited to blocking rate hikes only by
insurers that spend less than 70% of revenues on medical claims.
Many insurance commissioners do not want the federal government to supersede
state regulators.
Feinstein and Schakowsky's proposal is designed to set a minimum standard,
allowing the secretary of Health and Human Services to intervene only in states
that do not strengthen their review of rates.
"There is no need for federal involvement in states with insurance
commissioners who are protecting consumers," Feinstein said Tuesday.
McRaith acknowledged that additional regulation alone would not control
rising prices charged by hospitals, doctors and other providers or hold down
increasing use of medical care by consumers. But he said it could help
policymakers make better decisions about tackling rising healthcare costs.
"The rate review process, in fact, will be an opportunity to learn, to gather
information," he said.
noam.levey@latimes.com
Copyright © 2010, The Los Angeles Times