Are Some States Unequipped To Review ‘Unreasonable’ Health Insurance Rates?

The Los Angeles Times’ Noam Levey has an interesting article this morning examining just how powerless some state regulators are when it comes to controlling out of control health insurance premiums. Under the new health care law, these regulators are tasked with reviewing premiums and denying “unreasonable” increase, but as Levey discovered, in some states, insurers have effectively neutered their effectiveness:

Since 2003, insurance companies and HMO’s have given more than $42 million in state-level campaign contributions, often targeting lawmakers who sit on the committees that decide how much power regulators will have, according to campaign finance data analyzed by the Tribune Washington Bureau and the National Institute on Money in State Politics.

In some of the nation’s largest states, those same lawmakers have effectively blocked legislative efforts to control the industry.

Now, consumer advocates and administration officials are urgently trying to spark new state efforts because the new healthcare law only gives the federal government limited power to regulate premiums, traditionally a state responsibility. The Obama administration plans to announce a series of $1 million grants next week to help states increase their oversight.

The health law makes $250,000,000 in grants available to states to review premium increases between 2010 and 2014. To qualify for a grant, a state must provide the Secretary with “trends in premium increases in health insurance coverage in premium rating areas in the State” and “make recommendations, as appropriate, to the State Exchange about whether particular health insurance issuers should be excluded from the Exchange based on a pattern or practice of excessive or unjustified premium increases.”


The first round of rate review grants did not require states to adopt a strict prior review process that would have given regulators the authority to deny “unreasonable” increases, and one would think that this will change with subsequent waves of grant dollars. Unfortunately, some states like California — a state that has passed legislation implementing large portions of the law — are already falling short of expectations, prompting the group Consumer Watchdog to ask HHS Secretary Sebelius to reject the state’s application. “We ask this not to deprive the state of needed funds, but to prevent the funds from being used for a purpose that is near-opposite the intent of the law,” the group wrote.” “In effect, the state would use the HHS grant money to hire actuaries who may be able to look at insurance rates but will be prevented by law from regulating them. The governor’s legislative proposal, referenced in the grant application, explicitly states that when an insurance rate is found to be both unreasonable and unjustified, or plain inaccurate, the most that regulators may do is to publish that information online.”

Currently, 23 states do not review and approve premium changes in the individual market and 5 of those 23 have no rate regulations at all. HHS will need to establish clear standards for giving out grant dollars and Levey’s article about the existing status quo only reiterates the importance of adequate rate review.