Democrats attempt to rein in insurance rates

Congressional Democrats have begun pushing legislation giving government regulators greater authority to block big increases in health insurance premiums, kicking off what is expected to be a years-long process of revising and expanding their major healthcare overhaul.

The move, which comes less than a month after President Obama signed the healthcare legislation, is aimed at giving all states the power to stop premium hikes deemed excessive and allowing the federal government to step in if the states don’t act.

“This is a gaping hole in our regulatory system, and it is unacceptable,” Senate Health Committee Chairman Tom Harkin (D-Iowa) said Tuesday as he opened a hearing on the proposed change to the healthcare bill, the first since the legislation was enacted.

Responsibility for regulating insurers has traditionally fallen to the states, but insurance commissioners’ ability to control rate hikes currently varies widely from state to state. Senior Democrats on Capitol Hill, backed by Senate Majority Leader Harry Reid of Nevada and House Speaker Nancy Pelosi of San Francisco, are exploring ways to standardize that authority.


Reid is talking with California Sen. Dianne Feinstein, a leading proponent of the additional regulation, about ways to attach the proposal to a piece of legislation already moving through the Senate, according to a senior Democratic aide on Capitol Hill. That could sidestep expected opposition from Republicans.

Republican lawmakers and insurance industry leaders say the push for more regulation will not address rising medical costs, which many experts say are helping drive up premiums.

“Health plan premiums are a symptom, not a cause of the problem,” said Karen Ignagni, who heads America’s Health Insurance Plans, the industry’s Washington-based lobbying arm.

Republicans, meanwhile, are urging less regulation, which they say will foster greater competition and control premiums. “It is barking up the wrong tree,” Sen. Lamar Alexander (R-Tenn.) said of the Democratic proposal.


But consumer groups and many Democratic lawmakers believe more oversight is needed at a time when many insurers are increasing their profits by pushing double-digit premium increases such as the ones Anthem Blue Cross has proposed in California.

Tuesday, Minneapolis-based UnitedHealth Group, one of the nation’s largest insurers, reported that its first-quarter profit rose 21% compared with last year, hitting $1.19 billion.

“People say, ‘Great, you passed this big bill. But we are seeing these giant rate increases. What are you going to do about it?’ ” said Rep. Jan Schakowsky (D-Ill.), who is pursuing more regulations with Feinstein.

Under the recent legislation, the secretary of Health and Human Services is limited to working with state regulators to develop a process for reviewing proposed premium increases to determine whether they are “unreasonable,” a standard that is still being defined.


Insurers that propose such hikes will be required to post justifications on their websites.

The healthcare bill would also require insurance companies for the first time to dedicate at least 80% of their premiums to paying medical claims. The requirement increases to 85% for plans serving large employers and other large groups of customers.

This reduces the proportion of companies’ revenue that can go to administrative expenses, such as executive salaries and stockholder dividends, which some analysts think could restrain premium growth.

Insurance commissioners in some states have the power to go further and actually block rate hikes if they deem them excessive or unjustified.


But insurance regulation varies widely from state to state, and some state regulators do not even require health insurers to publicly disclose proposed premium increases. Others conduct only the most cursory review of most proposed changes.

“Our department needs additional tools,” Michael T. McRaith, who heads the Illinois Department of Insurance, told lawmakers Tuesday.

In California, the state insurance commissioner, who is in the process of reviewing Anthem’s proposed hikes, is limited to blocking rate hikes only by insurers that spend less than 70% of revenues on medical claims.

Many insurance commissioners are wary of federal intrusion on state authority, but Feinstein said they needn’t worry.


“There is no need for federal involvement in states with insurance commissioners who are protecting consumers,” Feinstein said Tuesday.

McRaith acknowledged that additional regulation alone would not control rising prices charged by hospitals, doctors and other providers or hold down increasing use of medical care by consumers. But he said it could help policymakers make better decisions about tackling rising healthcare costs.

“The rate review process, in fact, will be an opportunity to learn, to gather information,” he said.