Health Law: States Control Insurers' Premiums
RENEE MONTAGNE, host:
As we know, health insurance premiums have been going up much faster than wages in recent years. Residents here in California with individual policies from Anthem Blue Cross were facing rate hikes of up to nearly 40 percent. The insurer put off its plans after being slammed by bad publicity and also finding itself in a fight with the state's insurance commissioner.
At least two other states have been in court trying to stop rate hikes. These episodes raise a big question about whether the new health law will hold down insurance premiums. NPR's Joanne Silberner reports.
JOANNE SILBERNER: The new federal health law leaves it up to the each state to review and approve health insurance premium increases. Basically, the way it is now. And that worries Larry Kirsch. He's a health economist and consultant who works with states. He says, when it comes to standing up to insurers, a lot states are outmanned and outgunned.
Mr. LARRY KIRSCH (Health economist): The large majority of states would face a real challenge. They're stretched very thin.
SILBERNER: Some states don't have their own experts to review rates. And they face enormous political pressure from insurers, which have lobbyists in every state. And even if the states could effectively insist that insurers drop their rates, he's not sure how much good it would do.
Mr. KIRSCH: Even with this machinery, under the best of all possible imaginings, the likelihood of costs going up it's probably very, very high.
SILBERNER: It's not that insurers are always trying to make more money. Sometimes they're just passing on higher rates from doctors and hospitals. Massachusetts is an example of what happens when states try to hold down rates. A couple of years ago, the state required everyone to have health insurance. That's put a big focus on holding down insurance costs, says Nancy Turnbull.
She has experience from working on the state's insurance review board. Now she's at Harvard and also helps oversee the new state plan. Last month, the state rejected virtually all proposed rate increases now the insurers are fighting back in court.
Ms. NANCY TURNBULL (Harvard University): Certainly, at the moment, rates have been rolled back to the level of last year. But if the court finds that the division of insurance exceeded its authority or didn't apply it correctly, then I think the consequence for consumers is going to be they're going to get large retroactive rate increases. And that's obviously not a good thing.
SILBERNER: California Senator Diane Feinstein says there's a roll for the federal government here. She wants the U.S. Secretary of Health and Human Services to be able to block increases that are more about profit than about health care. Feinstein testified about that, recently, at a hearing.
Senator DIANE FEINSTEIN: This legislation, completely, can simply create a federal fallback, allowing the secretary to conduct reviews of potentially unreasonable rates in states where the insurance commissioner does not already have the authority or capability to do so.
SILBERNER: But insurers don't like the idea of federal oversight. Karen Ignagni heads the industry trade group, America's Health Insurance Plans.
Ms. KAREN IGNAGNI (President, America's Health Insurance Plans): Rate review should be done at the ground level, closer to the consumer.
SILBERNER: And she's there are enough constraints on insurers under the new law as it is, such as caps on profits and administrative costs.
Ms. IGNAGNI: An arbitrary cap on rates would be similar to setting an arbitrary cap on the price of cars, but yet not controlling in any way or doing anything about the supply costs - the costs of steel, the costs of other types of elements that are embedded in making a car.
SILBERNER: The challenge for whoever winds up with the task of overseeing insurance premiums will be how to cut excess profits while leaving the insurers enough money to pay doctors, hospitals and drug companies.
Joanne Silberner, NPR News.
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