President Obama’s health care bill doesn’t contain many new proposals, but a provision that would allow the federal government to review and deny excessive, unreasonable or discriminatory health insurance premium increases is stirring up some controversy. Sen. Dianne Feinstein (D-CA) proposed the amendment — which would limit insurers’ ability to exploit the time between passage of the bill and 2014, when reforms are fully in place — but it was not included in the final Senate bill “because of the objections” of an unnamed Democratic senator.
Conservatives are now seizing on the provision to further their claim that Obama wants the government to take over the health care system:
— “In other words, de facto price controls….The result of this rate-setting board will be less competition in the individual market, as insurers flee expensive states or regions, or even a cascade of bankruptcies if premiums are frozen and the cost of the care they are expected to cover continues to rise.” [Wall Street Journal, 2/23/2009]
— “But more important, attempts to control prices by government fiat ignore basic economic laws — and the result could be disastrous for the American health-care system.” [New York Post, 2/23/2009]
But if conservatives want to argue that rate review will lead “less competition in the individual market” or “a cascade of bankruptcies” they should point to some specific examples in the more than 25 states that have already instituted the policy. Of course, it’s unclear that they can.
The same health insurers that operate in states that do not review premiums “also operate in many other states that do have prior approval requirements.” Rate regulation protects consumers from sudden spikes and limits insurers ability to lure consumers with low introductory rates without drastically undermining the market. In fact, states with rate review, like Minnesota — which “has had prior approval in place since 1993 — “has a vibrant, competitive individual health insurance market with plenty of carriers and stronger-than-average individual enrollment.”
The problem with rate review isn’t that it goes too far; it’s that it may not go far enough. Insiders predict that insurers could game the review by transferring cost increases into higher deductibles and co-payments, despite their objects to Obama’s proposal. As former health insurance executive Wendell Potter pointed out this morning on CNN, “I think they’ll find away around it.” “The regulators need to focus on how the insurance companies are shifting the cost of health care from them and to their consumers to people who are insured. Obviously they’ve been increasing premiums and making people pay more out-of-pocket. They can see they are increasing the premiums modestly. But if you look closely, they are shifting more and more of the cost to consumers. That’s something that regulators will have to watch in the future.”