Federal Auditors
Will Soon Review Health Insurance Rates in 10
States
Published: July 25, 2011 - New York Times
WASHINGTON — The Obama administration will soon take over the review of health
insurance rates in 10 states where it says state officials do not adequately
regulate premiums for insurance sold to individuals or small businesses.
At least one state, Iowa, has protested the federal decision and asked
administration officials to reconsider.
Several other states acknowledged that they lacked the power under state law
to review health insurance rates. Several insurance commissioners tried and
failed to get such authority from their state legislatures this year.
Starting Sept. 1, federal and state officials will begin to scrutinize
proposed rate increases of more than 10 percent to determine if they are
justified. White House officials say their ability to publicize excessive,
unreasonable rates will be a major protection for consumers under President
Obama’s health care law.
Many individuals and small groups of employees have seen premiums rise 20
percent or more in the last year.
Seven states — Alabama, Arizona, Idaho, Louisiana, Missouri, Montana and
Wyoming — do not have effective rate review programs for either individual or
small-group health insurance, so federal officials will do the reviews in both
markets, the administration said.
In three other states — Iowa, Pennsylvania and Virginia — the federal
government will review proposed rate increases for small groups and will allow
states to review individual rates.
James J. Donelon, the Louisiana insurance commissioner, said: “I cannot
quarrel with the federal finding. We do not have any authority to regulate
health insurance rates under Louisiana law.”
“I am a Republican,” Mr. Donelon added. “I believe in competition as the best
way to protect consumers from unreasonable rates. But I have no way of knowing
whether they are reasonable or unreasonable because companies have not been
required to file rate increases with our department.”
In Montana, a bill to provide the insurance commissioner with power to review
health insurance rates died in the Legislature. The commissioner, Monica J.
Lindeen, said she would seek such authority again next year because it would be
much better for state officials rather than federal officials to judge what was
reasonable.
“We have so much more experience, expertise and knowledge about companies and
market conditions in Montana,” Ms. Lindeen said.
Federal officials have not publicly explained why they concluded that rate
regulation in the 10 states was inadequate.
In a typical letter to one state, Steven B. Larsen, deputy administrator of
the federal Centers for Medicare and Medicaid Services, said, “Iowa does not
meet the criteria for an effective rate review program in the small-group
market.” He did not cite specific deficiencies.
Susan E. Voss, the Iowa insurance commissioner and president of the National
Association of Insurance Commissioners, said the Obama administration was
evaluating states in an uneven, inconsistent way. Ms. Voss said she had at least
as much authority to review rates as officials in other states whose procedures
had been found acceptable.
Senator John Barrasso, Republican of Wyoming, complained that federal
officials were stripping states of the freedom to run their health insurance
markets.
“In Wyoming, state leaders have chosen to let the free market work,” Mr.
Barrasso said, “ The president and his administration have no idea what is best
for the people of Wyoming. The people of Wyoming know what works for our state
better than any Washington bureaucrat.”
To win federal approval for its rate review program, a state must post
information about proposed rate increases on a public Web site.
Bill Deal, director of the Idaho Insurance Department, said he could not meet
this requirement because health insurance rate information was considered
confidential and proprietary under state law.
Still, Mr. Deal said, “we carefully review rates for individuals and small
groups, and it’s difficult for me to understand why we have to have another
layer of regulation from the federal government.”
Federal officials will generally follow the definition of “small-group
market” found in a state’s insurance laws. If state law does not define it, a
small group will be defined to include employers with 50 or fewer employees.
Missouri does not require health insurers to file rate increases with the
state, nor does it have authority to approve or disapprove increases.
Melissa L. Fox, a spokeswoman for the Pennsylvania Insurance Department,
said, “We do not have rate review authority in the small-group market, with a
few exceptions.”
And in Virginia, Kenneth J. Schrad, a spokesman for the State Bureau of
Insurance, said the agency did not regulate small-group rates because “we can do
only what state law authorizes us to do, and state law does not say anything
about rate review in that market.”
The White House pointed to Oregon as a state where consumers benefited from
strong rate regulation. Regence Blue Cross Blue Shield of Oregon sought a 22
percent increase in individual rates, but in a ruling last week the state
allowed only 12.8 percent. The company said that was not enough to keep pace
with anticipated medical spending for its members.