Seeking to deal with a problem that seemingly fell outside the scope of the Affordable Care Act, the Obama Administration proposed new rules aimed at curbing what they consider to be “unwarranted” premium rate hikes from health insurance companies.
Under the proposed regulation, which spells out the details of a key provision in the new federal health-care law, next year any insurer seeking a rate increase of 10 percent or more for an individual or small group plan would be required to file financial information justifying the raise with federal and state officials. (Beginning in 2012, the percentage rate increase that triggers the review will be adjusted for each state to reflect its particular market trends.)
State authorities would then analyze the data submitted by the insurer to determine if the increase is “unreasonable.” If federal officials determine that a state lacks the resources or power to conduct such a review, the federal Department of Health and Human Services would step in to conduct it.
Either way, if a rate increase were found to be unjustified, that finding would be posted on both HHS’s and the carrier’s Web site along with the company’s financial disclosures – including, for example, how much it is compensating top executives.
More robust rate review was kept out of the health care law, because it was submitted late and wouldn’t have made it through the reconciliation sidecar. This just mandates that insurance companies justify their increases. Many states already have these demands in place; it seems that those states which do not would have HHS do the review for them.
But crucially, the remedy for an unjustified rate increase is little more than public shaming. HHS cannot reject rate increase claims in the states, they can only put the finding on their website. With the exchanges, it’s possible that shoppers will see that information. And states will be able to bar from the exchanges insurance companies who engage in a pattern of unjustified rate hikes. But there’s no mechanism in this rule, or in the health care law, to reject rate increases.
This is fine, and so is the Justice Department anti-trust lawsuit against a Blue Cross provider in Michigan who is effectively a single carrier in the state. But these are nudges, not mandated rules that really would restrict the industry and force it open to competition. Hopefully the behavioral economics approach will actually work for consumers. But if you’re an insurance company that wants to keep raising rates and keeping a virtual monopoly in your state, you can still have that opportunity.