Senate Bill Sets
a Plan to Regulate Premiums
Published: April 20, 2010 - New York Times
WASHINGTON — Fearing that health
insurance premiums may shoot up in the next few years, Senate Democrats laid
a foundation on Tuesday for federal regulation of rates, four weeks after President
Obama signed a law intended to rein in soaring health costs.
After a hearing on the issue, the chairman of the Senate health committee, Tom
Harkin, Democrat of Iowa, said he intended to move this year on legislation
that would “provide an important check on unjustified premiums.”
Mr. Harkin praised a bill introduced by Senator Dianne
Feinstein, Democrat of California, that would give the secretary of health
and human services the power to review premiums and block “any rate increase
found to be unreasonable.” Under the bill, the federal government could regulate
rates in states where state officials did not have “sufficient authority and
capability” to do so.
The White House offered a similar proposal in the weeks leading up to
approval of the health care legislation last month. But it was omitted from the
final measure, in part for procedural reasons.
Reviving the proposal on Tuesday, Mr. Harkin said: “Rate review authority is
needed to protect consumers from insurance companies’ jacking up premiums simply
because they can. Protections must be in place to ensure that companies do not
take advantage of current market conditions before health reform fundamentally
changes the way they do business in 2014.”
“Currently,” Mr. Harkin said, “about 22 states in the individual market and
27 states in the small group market do not require a review of premiums before
they go into effect — and perhaps even more. This is a gaping hole in our
regulatory system, and it is unacceptable.”
Under the new health care law, starting in 2014, most Americans will be
required to have insurance. Insurers will have to offer coverage to all
applicants and cannot charge higher premiums because of a person’s medical
condition or history.
Michael T. McRaith, director of the Illinois Department of Insurance, told
Congress on Tuesday, “There is a distinct possibility that less responsible
companies will raise rates to price out people who are sick or might become sick
between now and 2014.”
Mr. McRaith said he and the governor of Illinois, Pat Quinn, a Democrat,
“unequivocally support state-based insurance regulation,” because local
officials understand local markets.
He endorsed Mrs. Feinstein’s bill, saying it would “provide an impetus” for
states to regulate premiums if they did not already do so.
Karen M. Ignagni, president of America’s Health Insurance Plans, a trade group
for insurers, said Congress should let the new law work before piling on
additional requirements.
Congress, she said, has largely ignored the cause of rising premiums: the
explosive growth of medical costs and the power of hospitals
and other health care providers to dictate prices.
Ms. Ignagni said the law imposed new requirements, taxes and fees on health
plans, which could further drive up costs.
Senator Lamar
Alexander of Tennessee, the No. 3 Republican in the Senate, said: “Health
insurance companies’ profits for one year equal about two days of health care
spending in the United States. So even if we were to take away all the profits
of the so-called greedy insurance companies, that would still leave 363 days a
year when health care costs are expanding at a rate our country cannot afford.”
Grace-Marie Turner, president of the Galen Institute, a research center that
advocates free-market health policies, said the Democrats’ proposal was unlikely
to succeed in lowering insurance costs.
“Capping premiums without recognizing the forces that are driving up costs
would be like tightening the lid on a pressure cooker while the heat is being
turned up,” Mrs. Turner said.
Mrs. Feinstein said her bill would close what she described as “an enormous
loophole” in the new law. And she said health insurance should be regulated like
a public utility.
“Water and power are essential for life,” Mrs. Feinstein said. “So they are
heavily regulated, and rate increases must be approved. Health insurance is also
vital for life. It too should be strictly regulated so that people can afford
this basic need.”
Mr. Harkin interrupted the hearing to note that one of the nation’s largest
insurers, UnitedHealth Group, had just reported that its first-quarter earnings
had increased 21 percent, to $1.19 billion, surpassing Wall Street expectations.
Some securities analysts say they doubt that insurers can sustain such gains
after major provisions of the new law take effect.