This morning, during a discussion about health reform with progressive bloggers, I asked House Speaker Nancy Pelosi (D-CA) if the Senate health care bill did enough to prevent insurers from jacking up health care rates between now and 2014, (when the exchanges become operational). Noting that insurers could circumvent President Obama’s proposed national rate review authority by shifting more costs into deductibles and co-payments, I pressed Pelosi on whether the reconciliation package strengthened the President’s language or included new provisions to prevent insurers from increasing rates in anticipation of the new regulations.
Pelosi explained that the Senate bill prevents insurers from excessively increasing rates in three ways:
PELOSI: The biggest lever is to prevent them from participating in the exchange. That’s what they want more than anything. Because it’s 40 million new people who will have access. By and large, mostly new people have access to health insurance, subsidized by the taxpayer. I mean, this is a big deal for them. And I think that is the biggest lever. [...] We have the rate review. We have three things I mentioned before. We have rate review, we have the depriving of the opportunity to participate, and the rate review is related to depriving them of participating, and also fining them and all that goes with that for depriving people of insurance because of a health condition, health discrimination issues that we can bring against them.
The effectiveness of the national rate review board and the threat of excluding insurers from participating in the exchange (if they significantly increase rates in the interim period) will depend on the oversight capabilities of these institutions and what constitutes an “unreasonable” rate hike. For example, several states have used their rate review authority to avoid sudden premium increases, but it’s unclear if rate review has succeeded in significantly lowering insurer rates. In some cases, industry friendly commissioners have failed to enforce state regulations, allowing issuers to circumvent consumer protections.
This close relationship between insurers and their regulators could also undermine states’ ability to exclude insurers from the exchange. Under the Senate bill, the Secretary of Health and Human Services, in consultation with the states, will develop a plan to look for “unreasonable increases.” Insurers are required to submit “a justification for an unreasonable premium increase” to the state insurance commission authority, who then makes the appropriate recommendations “to the State Exchange about whether particular health insurance issuers should be excluded from participation in the Exchange based on a pattern or practice of excessive or unjustified premium increases.” But the legislation does not appear to set any firm standards or definitions and could allow insurers to take advantage of weak state regulators.
Today, the House Budget Committee also approved a motion (by a vote of 24-15) instructing the Committee chair to ask the rules committee to allow an amendment establishing a national rate review authority.