Many Obamacare provisions are intended to protect Americans from the private insurance industry, such as measures to prevent insurers from denying coverage to Americans with pre-existing conditions and to keep rising insurance premium rates in check. Nevertheless, as the New York Times reports, some of America’s largest insurers are exploiting a lack of stringent oversight in Obamacare to hike their premiums by double-digits anyway.
Insurers like Aetna and Anthem Blue Cross are requesting rate hikes as steep as 26 percent — amounting to hundreds of dollars that Americans will be forced to pay in higher premiums every month — in states such as California and Florida, and there is little that states can currently do to stop them:
Critics, like Dave Jones, the California insurance commissioner and one of two health plan regulators in that state, said that without a federal provision giving all regulators the ability to deny excessive rate increases, some insurance companies can raise rates as much as they did before the law was enacted.“This is business as usual,” Mr. Jones said. “It’s a huge loophole in the Affordable Care Act,” he said.
While Mr. Jones has not yet weighed in on the insurers’ most recent requests, he is pushing for a state law that will give him that authority. Without legislative action, the state can only question the basis for the high rates, sometimes resulting in the insurer withdrawing or modifying the proposed rate increase.
While Obamacare does require state regulators to review any rate increase request above 10 percent, it does not endow those regulators with any meaningful veto power. Such rate-setting policies are left to states’ discretion, and although 37 states may currently negotiate or reject insurers’ desired hikes, some states with large markets — such as California — do not have this ability.
Large insurers claim that the hikes are necessary in order to keep up with general medical inflation. But since medical inflation has actually been relatively low in recent years, this claim falls flat. Insurers may actually be raising their rates in an attempt to counteract other Obamacare consumer protection measures such as the “80/20 rule” that requires insurance companies to spend at least 80 percent of the premiums they charge on actual care rather than their profits or overhead. In 2014, Obamacare will also end the practice of medical “underwriting” — taking a consumer’s current health into consideration when setting his or her premium rates — so insurance companies may be trying to lock in higher rates on sicker Americans while they still can.
Fortunately, the 80/20 rule — which has already put over $1.5 billion in insurance rebates back in consumers’ pockets — will help ensure that Americans are refunded some of their money if the latest round of rate hikes are excessive. But the only way to ensure that Americans are not held hostage to the whims of private insurers is to expand state regulators’ ability to negotiate and control premium rates.
And lawmakers are quite aware of the discrepancy. Three years ago, Sen. Dianne Feinstein (D-CA) introduced the Health Insurance Rate Authority Act of 2010 in an effort to give regulators more control over insurance rate hikes, but the bill died in committee. President Obama has also called for greater federal oversight of insurance rates.