A study released this morning may lay out the possible future of state intervention in premium increases for health insurance.
The Kaiser Family Foundation examined the different methods by which each state reviews proposed health insurance rates. They found:
Many states use subjective standards to guide the review and approval of rates, such as that rates cannot be “excessive, inadequate, or unfairly discriminatory” or that “benefits are reasonable in relation to premiums charged.” Such standards give states more flexibility, but can make the process appear arbitrary and opaque to consumers and the public.
Does this sound familiar in Massachusetts? The election year– small businesses health care bill– granted the executive branch the authority to reject premium rate increases if they are deemed “excessive…or unreasonable.”
We saw a preview of this ugliness with the Patrick administration’s (pre-bill approach of) capping premium rates and rejecting hundreds of premium increases. However this approach is neither viable nor useful. Insurance companies may be easy political targets, but artificially capping rates without actuarial consideration is ultimately an ineffective method of cost control. It threatens the long-term viability of insurers and their ability to reimburse providers. Many of the insurers will lose money this year. Andrew Dreyfus, president and chief executive of Blue Cross Blue Shield of Massachusetts (BCBS), outlined this reality at a recent conference in Boston. According to The Boston Globe, BCBS lost money for the first nine months of this year because of state caps on the premiums it charges small businesses and individuals.
With the open-end criteria laid out for rate reviews in the Kaiser study, it is only a matter of time before politics gets involved, and states start to reject premium increase across the board, forcing insurers to consolidate or go out of business. The federal bill only strengthens the hand of HHS Secretary Sebelius and state regulators in their rate reviews.
I support greater transparency, but the rhetoric coming out of Washington, and Beacon Hill, sounds more like an old mafia movie instead of true consumer protection.
I think policymakers are missing the point of why premiums are so high to begin with. My fear is that Stuart Altman of Brandies will be proven right that we could be headed towards a “health care brownout,’’ a situation in which revenues are squeezed and government rate controls are imposed. As he plainly stated “The implications of that are not good.’’