Fight Over Premium Hikes Just Beginning

Insurers’ premiums played a key, if ironic, role in the waning moments of the national health reform debate. Outrage over Anthem Blue Cross’s proposed double-digit hike for individual policyholders was one of the factors that helped congressional Democrats gain momentum to pass reform. However, legislators failed to create a sought-after national authority that would regulate insurers’ premiums, as Democrats could not technically add the provision through the budget reconciliation process.

As a result, responsibility for regulating insurance remains with states, which means Anthem’s planned increases may well go through: California is among several dozen states that cannot reject insurers’ rates. However, a pair of Assembly members are backing a bill (AB 2578) that would add such authority.

According to co-sponsor Dave Jones (D-Sacramento), the bill draws on $250,000 available through reform legislation to set up state-level rate regulators and would force California insurers to get state approval for premium increases exceeding 7% annually. That threshold is based on projections that medical costs normally increase just 4% to 6% annually.

Although opposed by insurers and physicians — and reportedly California Insurance Commissioner Steve Poizner — the bill has passed a key committee and has the support of groups like AARP and labor unions.

Gaining rate-setting authority may expose California to new challenges. States’ efforts to curb premium hikes are meeting heavy resistance, with insurers from Rhode Island to Washington, D.C., saying that regulators are making decisions that threaten long-term solvency.

The most visible stand-off is in Massachusetts, where the state’s insurance commissioner rejected nearly 86% of insurers’ proposed premium hikes — the first time a Massachusetts commissioner has disapproved rates since gaining authority in 1977. Six of the state’s leading insurers are now suing to win a preliminary injunction that would allow them to increase rates.

A showdown also looms in Maine, where a court will soon rule on whether the state’s insurance superintendent acted within her authority last year when she blocked a proposed 18.5% premium increase for Anthem Blue Cross and Blue Shield policies in favor of a 10.9% increase. Insurers and officials nationwide are closely following the Maine case because “what happens in one state certainly has a ripple effect,” according to Sandy Praeger, Kansas’ insurance commissioner and chair of the National Association of Insurance Commissioners’ health insurance and managed care committee.

Insurers argue that capping rates isn’t the answer and that their expenses are increasing faster than premium hikes, as part of a broader cost spiral fueled by rising provider spending. Freezing premiums may result in private insurers or even the hospitals that depend on them declaring bankruptcy, according to Richard Epstein, a law professor at the University of Chicago.

Meanwhile, some suggest that officials’ rate rejections are motivated by populist anger and, in Massachusetts, a governor’s race that pits incumbent Gov. Deval Patrick (D) against a former health plan executive. However, state insurance commissioners contend that — in contrast to the 14 state attorneys general, who are challenging health reform’s constitutionality — politics aren’t part of the equation. “We didn’t get to vote on this bill. We’ll carry out the law,” Jane Cline, West Virginia’s insurance commissioner, said.

The commissioners note that they are slated to play key roles in rolling out reform measures and overseeing insurers’ efforts to meet new medical-loss ratios on spending, which means more confrontations with insurers lie ahead. Pending the outcome of AB 2578, California may soon join the fray.

State of the States

  • Alaska’s House Judiciary Committee is considering legislation (HB 423) that would challenge the constitutionality of the individual mandate established in the new health reform law, the Anchorage Daily News reports. The bill is modeled after similar legislation in other states and requires that the attorney general sue the federal government if Alaskans are penalized for not obeying the mandate. However, the bill was introduced with just two weeks left in the legislative session, and the state Senate’s president notes the issue is unlikely to pass (Cockerham, Anchorage Daily News, 4/2).

Tracking the Polls

  • President Obama‘s ratings have slightly increased after signing health reform into law, according to the latest Gallup poll, The Hill‘s “Blog Briefing Room” reports. According to the poll, 42% of adults approve of Obama’s handling of health care while 54% disapprove, compared with 37% and 36% in January and February, respectively (Fabian, “Blog Briefing Room,” The Hill, 4/5).
  • About 88% of 201 health care experts and executives who responded to a new survey by the Commonwealth Fund said the new health reform law would be successful in extending coverage to the uninsured, CQ Weekly reports. However, respondents questioned whether the new law would improve affordability for U.S. residents who already have health insurance, scale back the rising costs of care and prevent a hike in the federal deficit. Respondents also expressed uncertainty over whether there would be enough primary care doctors to deal with the expected spike in the number of patients seeking care, the enforcement of cost controls and the insurance mandate on all U.S. residents, and prevention and control of chronic diseases (Norman, CQ Weekly, 4/5).
  • Recent polls show that most U.S. residents expect the new health reform law to increase costs and decrease quality of care, the Christian Science Monitor reports. In one Washington Post poll, 55% of U.S. residents said that they expect their own health care costs to rise, and 60% said that the nation’s overall health care costs will increase (Trumbull, Christian Science Monitor, 4/2).

Republican Response

  • Senate Minority Leader Mitch McConnell (R-Ky.) recently said that repealing the new health reform law “probably” will not happen with Obama in office, USA Today‘s “On Politics” reports (Schouten, “On Politics,” USA Today, 4/2). He added that it might be possible to repeal parts of the law in the fall, even if Republicans do not have majorities in both chambers of Congress (Fabian, “Blog Briefing Room,” The Hill, 4/2).
  • Republicans are criticizing the new health reform law for expanding the federal work force, Politico reports. According to some GOP lawmakers, the tax provisions in the new law will require the Internal Revenue Service to expand by as many as 16,000 employees (Budoff Brown, Politico, 4/1).
  • Three liberal groups presented a petition on April 1 to the Republican National Committee that calls for GOP leaders to “take responsibility” for threats and incidents of vandalism against Democrats in the wake of passage of the new health reform law, Politico reports. The groups — the Brave New Foundation, Color of Change, CREDO and MoveOn.org — said that the petition has been signed by about 330,000 people (Sherman, Politico, 4/1).

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