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]