State Insurance Regulators Don't Always Have Authority To Regulate Insurance Rates

Earlier this week, the Dept. of Health And Human Services announced that consumers had saved $1 billion thanks to a condition of the Affordable Care Act that requires state insurance authorities to review health insurance premium increases of at least 10%. But in some states, those reviews are merely a formality that have no ability to rein in insurance premiums.

California is one of the 13 states where these mandated rate reviews are not binding.

“At the end of the day, the companies can tell us to pound sand,” the California insurance commissioner tells MarketWatch. “It’s very frustrating. Frankly, our hands are tied behind our back.”

In April, the commissioner’s review of Aetna’s small-employer rate hikes — ranging anywhere from 8% to 21% — were unreasonable, which didn’t seem to matter to the insurance company as it moved forward with the increases.

“I have no authority to actually enforce a reasonable rate here,” explained the commissioner, as he presumably started his day pushing a boulder up a hill. “At the end of the day, the health insurers and HMOs have the ability to set the rates wherever they see fit.”

The commissioner says that he’s only be able to achieve even “modest moderation” of insurance rates in fewer than half the cases he deemed excessive.

If the authority of these reviews is not uniformly set, this allows insurance companies to make up for nixed rate hikes in one state by simply raising rates in a state where the review is not binding.

For some reason, HHS thinks that consumers in these states aren’t at risked for being screwed. From MarketWatch:

[HHS] says that if carriers implement increases that fly in the face of the department’s or a state’s findings, they must publicly disclose their reasoning for raising the rates, which should help consumers make more informed choices when selecting health plans. “By shining a spotlight on unreasonable rate increases, the Affordable Care Act will bring unprecedented transparency to the insurance marketplace,” the HHS said in a statement.

These reviews currently only affect individual and small-group policies, which is a minority of insured consumers. However, they are going to become more important when the Affordable Care Act requirement for all Americans to have some sort of insurance kicks in.

Health insurers hike rates, ignore government [MarketWatch]


Edit Your Comment

  1. Kaonashi says:

    It isn’t necessarily a bad thing. Keeping rates low is the populist thing for states to do but the temptation will always be to suppress rates, some of which may be justified. The better choice is to make sure that x% of payments go towards care and then let the market work. Limiting the overhead that insurance companies can charge will stop them from raising rates in the name of profit and keep that side under control.

  2. Happy Tinfoil Cat says:

    Sounds like we can shrink government and save a few tax pennies by eliminating the Insurance Commissioner position. Heck, lets just deregulate the insurance industry completely. Deregulation worked so well for telecom, airlines, energy, gasoline, etc. Lets throw the shackles of big government off of the legs of big business. Yea, that will work. /S

    Since it will take a civil war to get a single payer healthcare system, lets just let our ‘inefficient governmental bureaucracy’ compete? What are the insurance companies so afraid of? There are tens of millions of Americans they currently refuse to insure anyway. Create something like MediCare which has something like 4% overhead, and let it compete. Let the free market be truly free. If they want, the new department can be mandated to make a minimum of 10% or 20% profit to make things more lucrative for those extremely efficient big businesses.

  3. dush says:

    So just let people purchase health insurance across state lines.

    • Captain Spock says:

      If you work for a company, apparently that is perfectly legal.

      Example? I work in Illinois near Chicago. My company provides me with Empire BCBS which is regulated and administered in New York City

    • VeganPixels says:

      By “let” I guess you mean ignore the for-profit health insurance lobby screaming at Congressional panel after panel for suggesting they do just that.

      • RvLeshrac says:

        This. So much this. If it would *DECREASE* rates, why in the hell would the insurers be wildly in favour?

        • TuxthePenguin says:

          Because insurers like BCBS could unify all their offerings into a single company and eliminate the overhead it takes to run in each state. They would save a TON of moeny from just that alone.

          • Chuft-Captain says:

            Yes, but all the individual Monkey Squires running the divisions would be out of their lofty, high-paying C-level exec positions when the primary Monkey King takes the reigns in hand, and you know they will never support THAT.

    • PunditGuy says:

      Enjoy the race to the bottom. “Across state lines” will become a euphemism for “from Delaware” or whichever state is first to completely abdicate any responsibility to its citizenry.

      • TuxthePenguin says:

        You would have something of a race to the bottom, but simply make the following changes:

        1. Buy across state-lines – what this really does is allow for a single insurance market and single representation. Right now in some states on insurance company is essentially the market. In Texas, its usually BCBS or United. Heck, even my wife (a teacher) has BCBS. What about Aetna and others?
        2. Stop allowing employers to offer these benefits as tax deductions – part of the reason rates go up is the consumer (the person) isn’t the customer (the business). As such, they are shielded from the real cost of the insurance. When I started having an all-hands meeting to discuss health insurance each year, the costs, benefits, etc (granted, that’s 20 or so people) they were shocked how much it really cost. And we went to HSAs REAL fast. It also instantly would make a market for exchanges and such.
        3. Force all insurance companies to offer uniform cafeteria plans, but all have a basic HSA/Major Medical plan as the basis: You’re covered from the start if you get ebola and are in the hospital for a month, but your annual screenings aren’t covered, etc. But you could buy add-ons that cover all that – pregnancy, cancer, etc. It turns insurance back into “insurance” – not prepaid medical care.
        4. Make all payments for medical care/insurance a 100% refundable tax credit: this means its essentially government backed and “free” to the taxpayer. They just need to front the money. And for those who cannot afford that, Medicaid becomes a sort of “lending” program that gives them this money up front, rather than after the year.

  4. whyt says:

    In our market, there are basically two insurers, one of which is Blue Cross. All Blue Cross had to do when it raised it’s rates this year by an obscene amount was to publish a short, terse explanation in the paper which was about two sentences that said “health care costs are going up.” How exactly does this empower me to “make a more informed choice?” The State Insurance Commission cannot touch them as long as they make a one or two sentence explanation in the paper. Now paying about $700 per month for just my own (group!) health insurance.