Concerns Raised Over Reform Law’s Ability To Control Premium Hikes
Although the new health reform law includes a provision intended to control steep increases to health insurance premiums, congressional Democrats and some consumer groups believe that the law does not go far enough to protect consumers, CQ Weekly reports (Benson, CQ Weekly, 4/19).
Under the overhaul, large health plans beginning on Jan. 1, 2011, will be required to spend at least 85% of every premium dollar on medical care, rather than administrative costs or profits. Individual and small group health plans' medical-loss ratio must be at least 80%. The new law would require insurers to pay a rebate to customers if their MLRs dropped under the new limits (California Healthline, 4/16).
HHS officials last week said they will work quickly to implement that provision so that it will take effect by the end of the year.
Meanwhile, the new reform law also allows the federal government to monitor rate hikes and review what it considers to be "unreasonable" increases.
According to some Democrats, premiums still could increase significantly before reaching that threshold. Sen. Dianne Feinstein (D-Calif.) in March introduced legislation that would allow the HHS secretary to deny or modify any rate increases before they take effect. The bill will be considered in a committee hearing this week.
According to CQ Weekly, more stringent consumer protections might be met with criticism. Further, allowing HHS to regulate premium rate changes could result in legal challenges, which has happened in states with laws allowing regulators to review insurance premium increases (CQ Weekly, 4/19).
Insurers Face Difficult Decisions Because of New Reform Law
The increased scrutiny over insurance company practices because of the new reform law could force many insurers to make tactical decisions before most provisions in the health law are implemented, the Washington PostÂ reports (Hilzenrath, Washington Post, 4/18).
One such decision has already caught the attention of lawmakers. The Senate Commerce, Science and Transportation Committee last week reported that some of the largest U.S. health insurers in 2009 adjusted their accounting practices in an attempt to classify more of their business as medical care and meet the minimum MLR requirements.
According to a report released by the committee, WellPoint recently reclassified certain expenses, including nurse hotlines and wellness programs, as "medical." Such items previously had been classified as "administrative" (California Healthline, 4/16).
According to the Post, insurers also must decide whether to increase premiums before rates come under stricter oversight or whether to avoid more people with pre-existing conditions before being required to accept them in a few years. Some analysts have said the new law gives health insurers incentive to attempt to reap larger profits before most of the provisions in the overhaul take effect.
However, the Post reports that there are "counter-incentives" to increasing costs now. Charging higher premiums now could result in insurers being prohibited from participating in the new health exchanges that will take effect in 2014.
Further, pushing up prices could draw negative attention to the industry and result in lawmakers taking a more aggressive stance against the industry. For example, WellPoint's attempt to raise premium rates in California by as much as 39% helped lawmakers argue that the overhaul law was necessary (Washington Post, 4/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.