New Consumer Watchdog Report Finds Regulation Curbing Rate Hikes in Mass., Maine, New York and Other States
WASHINGTON, May 11, 2011 /PRNewswire-USNewswire/ -- U.S. Senator Dianne Feinstein, Representative Jan Schakowsky, and Maine
The nonprofit consumer advocacy organization released a new report finding that rate regulation has begun to curb insurance premiums in Massachusetts, where the mandate that people buy health insurance -- the model for the 2010 federal reform law -- failed to control costs. Other states that are instituting or strengthening state laws requiring rate review and approval of health insurance rates, including New York, Oregon and Maine, are also seeing cost-control results. States without regulation of health insurance rates have seen massive and unjustified rate increases take effect with no power to stop them.
"Regulation of health insurance rates will lower premiums, incentivize insurers to control costs and thus save health reform," said Harvey Rosenfield, founder of Consumer Watchdog and author of California insurance rate regulation initiative Proposition 103. "The Massachusetts mandate on individuals to purchase insurance from companies can expand access when premiums are subsidized, but we now know it won't lower prices for consumers. Experience in states from California to New York has shown that rate regulation is the only way to force insurance companies to open their books, justify spending, and block excessive profits. Federal health reform will fail if insurers are allowed to continue raising premiums unchecked and consumers are priced out of the private health insurance market."
"While insurance premiums continue to spiral out of control, CEO's paychecks are getting bigger, and insurance companies are spending less on medical care and more on profits," said Senator Dianne Feinstein (D-Calif). "Today, in 17 states including California, state regulators do not have authority to block or modify insurance rate increases that are excessive, unjustified, or discriminatory. In order to protect consumers from skyrocketing insurance premiums, state regulators need this explicit authority to ensure rates are justified. This is why I have introduced the Health Insurance Rate Review Act of 2011, and why I have endorsed state legislation in California, AB 52, to close this loophole."
"Maine's comprehensive rate reviews of individual health insurance policies have saved consumers millions," said Maine Superintendent of Insurance Mila Kofman. "Our current approach includes public hearings around the state and the involvement of the Attorney General and consumer groups as intervenors. The rate filings and the backup data is public. Transparency and accountability are essential for effective consumer protection."
"Insurance companies have increased rates by double digits over the past several years -- one of the reasons we needed health care reform in the first place. Experience shows that consumers benefit when there is a cop on the beat -- an insurance regulator not just with the power to review premiums but with the authority to block increases that are not justified. The Consumer Watchdog report proves that all consumers -- individuals, families and businesses -- benefit when insurance companies are prevented from imposing unjustified rate increases, " said Representative Jan Schakowsky (D-Ill).
The primary conclusions of the Consumer Watchdog report are:
The Massachusetts "mandate" model did not control premiums.
Massachusetts' 2006 health reform law was the model for federal reform. It was predicted that the mandate on individuals to buy insurance from private firms would bring healthy people into the system and lower insurance costs and rates. However, premiums in Massachusetts remain the second-highest in the nation. Consumers and businesses are shifting to lower-benefit policies in response. The state is now racing to put in place strong rate regulation as the increases threaten the viability of the 2006 reform.
States moving to add or strengthen regulation are bringing down insurance rates.
Independent examinations of health insurance rate hike requests have uncovered math errors favoring the insurers, indications that rates were deliberately padded, and exaggerated projections of future losses. States that are moving to add prior approval regulation, or enforce laws already on the books, are showing success in reducing the rate of premium increases.
California property insurance regulation contains keys to successful rate oversight.
California's voter-approved Proposition 103 is the model for effective regulation that protects consumers from unjustified rate hikes. The law, which regulates auto, homeowners and business insurance (but not health insurance), requires prior approval of every rate change by the insurance commissioner, prevents insurers from passing on excessive administrative costs and profits to consumers, and allows consumers to independently challenge rates and be reimbursed for their time.
Proposition 103's protections translate directly to health insurance regulation.
Federal health reform does not require prior approval of rates
Although the 2010 federal reform law encourages rate oversight, none of its provisions require effective regulation of rates. The health reform law contains two provisions addressing what health insurers may charge:
HHS is expected to issue final regulations for review of "unreasonable" insurance rate hikes under the 2010 federal reform law by June 1.
States should be primary regulators, with federal backup if they fail.
Sen. Feinstein and Rep. Schakowsky (S137, HR416) have introduced legislation in Congress that would amend the federal health care law to authorize HHS to reject excessive and unjustified health insurance rates if states fail to regulate rates.
Download the report here: http://www.consumerwatchdog.org/resources/cwrateregulation.pdf
Health insurance premiums increased 138% in the last decade while medical inflation rose just 31%, according to the Kaiser Family Foundation. All five of the largest health insurance companies continue their trend of profit increases throughout the recession, with 1st quarter 2011 financial results showing profits up from the 1st quarter of 2010 by an average 16%. Consumer Watchdog's report finds that, if premium increases continue unchecked, health reform will fail in its primary goal of expanding access to health coverage because individuals will increasingly be unable to afford private insurance.
Consumer Watchdog is a non-partisan public interest organization with offices in Santa Monica, CA and Washington, D.C. For more information, visit is on the web at http://www.ConsumerWatchdog.org.
SOURCE Consumer Watchdog
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