States Need Regulation to Control Insurance Premiums Under Federal Health Reform, Says Consumer Watchdog
WASHINGTON, April 26, 2011 /PRNewswire-USNewswire/ -- The Maine Supreme Court upheld a decision by the state superintendent of insurance to reduce an excessive health insurance rate increase proposed by Anthem, in a decision issued Thursday. Consumer Watchdog said the victory for Maine consumers showed the need for effective rate regulation in every state to ensure that health insurers charge fair prices under national health reform legislation that will soon require every American to prove they have insurance.
"State regulators' close look at the numbers behind Anthem's proposed rate hike in Maine revealed an excessive increase that could not be justified. Consumers everywhere deserve the same level of scrutiny for skyrocketing insurance premiums. Without strong rate regulation, insurance will be priced out of reach for the average American and health reform will fail in its goal of expanding access to care," said Carmen Balber, Washington director for Consumer Watchdog.
Maine Superintendent of Insurance Mila Kofman reduced Anthem's proposed 2009 rate increase from an average 18.5% to 10.9%, saving over 12,000 individual policyholders about $5.4 million on a year's premium.
Maine requires "prior approval" of health insurance rates for all individual health insurance policies. Insurance companies must open their books and justify the need for every rate increase, and state insurance regulators must reject any rate that is excessive, inadequate or unfairly discriminatory. Maine regulators found that Anthem's projected claims trend was too high, and that the company's overall financial strength merited no profit margin or contribution to surplus in 2009. The company argued that "break-even" profit for the year was inadequate, a claim that was rejected by the courts.
Insurance commissioners in many states have begun seeking and exercising new authority to oversee rates. In California, legislation by Assemblyman Mike Feuer will be considered by the state Assembly on Tuesday that will give regulators the power to reject excessive premium increases and allow consumers to challenge rate increases as well.
Washington state's insurance commissioner is seeking the authority to consider the same company-wide surplus and profit data that factored into Maine's reduction of Anthem's increase. A company surplus of nearly four times the minimum was a factor in a Regence Blue Cross rate reduction by Oregon's insurance administrator in December of last year. And New Mexico's governor signed legislation this month that significantly strengthens the state's rate review process, including provisions allowing for consideration of an insurance company's overall surplus and reserves.
Consumer Watchdog outlined the elements of strong prior approval rate regulation, modeled after California's landmark rate regulation for auto, home and business insurance, Proposition 103, which has saved drivers in California $62 billion since 1988. They include:
- Require insurers to justify rate increases and receive approval for those increases before they may be implemented
- Guarantee the public's right to intervene to further reduce rates
- Require consumer premium refunds if rates that have already gone into effect are later found to be excessive
The group said that federal action is also needed in light of the health reform law's requirement that by 2014 every American prove they have health insurance, including:
- Increase federal grants to states for development of prior approval regulations
- Implement strong federal fallback regulations to take effect in states that do not adopt effective prior approval regulation
Federal legislation introduced this year by Sen. Dianne Feinstein and Rep. Jan Schakowsky aims to require HHS to reject excessive rates if states fail to act.
Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org
SOURCE Consumer Watchdog