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Why Some States Are Still Seeing Double-Digit Increases in Health Premiums

The Affordable Care Act gave state insurance commissioners the power to review rate increases of 10 percent or more but left it up to the states to decide whether they also have the power to reject them.

Among the many hopes expressed for the Affordable Care Act (ACA) was that it portended to slow the inexorable and exponential rise in health insurance premiums every year. Yet, in many states, it’s still business as usual. According to The New York Times, in California, Aetna proposed rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent in 2013—and there wasn’t a thing that the state insurance regulators could do about it. Other states have seen rates rise by at least 20 percent for some policyholders. These double-digit increases are hitting small businesses and the self-employed particularly hard.

This is happening even though, under the ACA, state insurance regulators are required to review any request for a rate increase of 10 percent or more. So what gives? It turns out that “reviewing” a request is not the same as being able to stop it, because that power was actually removed from the final ACA bill. And that’s the rub, according to California Insurance Commissioner Dave Jones, who said, “This is one of the critical missing pieces of national health care reform,” in his 2011 inaugural address.

Some advocates had hoped that the ACA would extend to all state insurance commissioners the power to kaibosh unreasonable increases in premiums. Rather, it left intact the current system, whereby state legislatures decide whether or not to hand that right to their commissioners.

Most states have chosen to do just that. However, in California and 14 other states, all insurance commissioners can do is review increases, but they can’t actually do anything about them. In contrast, New York State’s Insurance Department has the authority to reject excessive hikes, and so was able to keep rate increases in the individual and small group markets to below 10 percent in 2013.

Jones says that 35 states have given their insurance commissioners the authority to reject what they view as unjustified rate increases. “What’s strange about California not having that authority is that, since 1988, we have had that authority for auto, homeowners, and property/casualty insurance, and that has saved people tens of billions in premiums,” he says. “The absence of that authority [in health insurance] is extraordinarily frustrating. We review and determine if increases are excessive or unreasonable, but the most I can do is announce the finding. It is not binding. The ACA would been much better if that authority was included in the act.”

State commissioners who do have this hammer say they feel his pain. “I have sympathy in his concern,” says Michael F. Consedine, the Pennsylvania Insurance Commissioner. “One of the fundamental powers that insurance regulators should have is to regulate filings in their marketplace. Our marketplace and consumers are better off because of that power.”

Of course, state’s rights advocates argue that this decision is best left to the individual states, not the Feds. But wherever the authority comes from, state regulators believe that regulatory authority should, ultimately, reside in the states’ insurance departments, not in Washington, even if that means that some states miss out on the power to hold down health insurance rate increases. “In my mind, and most of my colleagues agree, regulation is best left to the regulators right there in the trenches,” Consedine says.

Jones, for his part, has decided to bypass Sacramento and go straight to voters for regulatory power through a ballot measure scheduled for the November 2014 elections. He has some deep-pocketed opposition, though. “Here in California, very powerful and well-resourced lobbies have successfully stopped four bills in last seven years,” he says. “I hope the ballot measure will do what the legislature hasn’t been able to do and extend the authority of the commissioner to include heath insurance and HMO products. Voters will have the opportunity to decide this question. I think it’s well past time, and I am hopeful they will support it.”

David Levine is a GOVERNING contributor.
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