Insurance Regulations Still Hampered By Industry Capture At State Level
I’m going to feed you a series of quotes from a New York Times article about the proposed federal rate review board, without revealing who the sources of the quotes are. See if you can guess who they are:
“You can’t separate the underlying solvency of companies from the rates they charge. The federal proposal would be a huge pre-emption of decisions that states have made over their history.” […]
“If you divorce rate-setting from financial oversight, that’s a fundamental flaw. Premiums must be reasonable in relation to the benefits. That becomes a fairly complex analysis.” […]
“From a consumer protection standpoint, the most important thing we do is ensure the solvency of companies. We would strenuously resist not having the ability to approve rates or having the commissioners’ oversight of rates overturned.”
These are not from insurance company CEOs or FreedomWorks lobbyists. These quotes come from state insurance commissioners in Wisconsin, Florida and Kansas. These people are charged with administering, enacting and enforcing the insurance regulations now at the heart of the health care bill. And their concerns are indistinguishable from the broader insurance industry.
A common argument from insurance companies and even some health reformers is that insurance companies are powerless, at the mercy of the skyrocketing cost of American health care, unable to manage their businesses without large rate hikes. The data that show rate increases well beyond the rate of health inflation, or insurers transferring profit to their parent companies to hide their true financial condition should put a stop to this talking point, and yet it never does.
It’s true that American health care is overpriced. But almost every other country that has dealt with this problem has sought to modify the insurance industry, not the providers (Britain being a notable exception). In so doing, they use the bargaining power of a single purchaser not consumed with a profit motive to drive down the provider costs. Anyone arguing insurance company powerlessness without addressing this subject is being willfully blind. Allow me to agree with Dianne Feinstein, of all people: “I believe, fundamentally, that all medical insurance should be not-for-profit.”
But that’s basically the position of the state insurance commissioners, long thought to be puppets for the industry. And if they are in charge of enforcing these vaunted regulations, I don’t know how you would expect the regulations to be anything but conciliatory toward those industries – actually including the providers.
As for the “Health Insurance Rate Authority” described in the President’s proposal, nobody has yet explained how that can pass the Byrd rule in a reconciliation fix. I don’t think there’s any chance of that. Which means that there would remain no federal entity engaged in oversight, outside of Congressional committees, of the health insurance committees. It’s still all left to the states, and people like those quoted in this article.
This newfound attack on the insurance industry must be met, at some level, with a workable plan to actually make the regulations stick. A federal rate review board, a repeal of the anti-trust exemption, all of these are nice, but they haven’t passed Congress and don’t seem to be part of this bill. So will anyone but a random state insurance commissioner get into the game?