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Thursday, September 16, 2010

Rate hikes: What's to blame?

Erin Kelly

Staff Writer

Year after year, insurers have been hiking rates for consumers who buy coverage on their own in the individual market. Earlier this year, you may have heard about Anthem Blue Cross attempting to raise premiums by 39 percent in California. After Health and Human Services Secretary Kathleen Sebelius asked for justification that those rates were necessary, they withdrew their request. This was, of course, before the passage of health reform. So, last week when some insurance companies raised their rates and blamed it on health reform, more than a few eyebrows were raised around here.

The situation in California was not unique. Whether a 56 percent proposed increase in Michigan or a 24 percent proposed increase in Connecticut, insurers across the country have been desperately trying to raise their premium rates and price consumers out of coverage. In Oregon in 2009, Regency Blue Cross Blue Shield requested a 20 percent increase, and according to Healthreform.gov,

…some rates for individual health plans in Washington increased by up to 40 percent until Washington State imposed stiffer regulations.

Again, all of these outrageous rate hike requests occurred before the law even passed. So now that insurers are pointing the finger at the new law as an excuse, we’re a bit perplexed at how they arrived at that conclusion.

 Apparently Secretary Sebelius is too. This week, she sent a letter to the insurance lobby, writing,

Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.

We couldn’t agree more. Increases far larger than those requested last week were standard before health reform even passed. What has changed, however, is that the health reform law puts new rules in place to make sure that the premium increases insurers want to impose on people are actually justified.

Before health reform, insurers often tried to increase their premiums purely to rake in more profit. Under health reform, starting in 2011, insurers will have to spend a specific amount of money on actual health care services and quality improvements, meaning that premiums can’t be raised simply to go toward lining the pockets of insurance company executives. If the insurance companies don’t meet those requirements, they have to return the excess money to the plan enrollees, not their stockholders. This is known as the “medical loss ratio,” and you can find out more about it here. States and the federal government will also have new authority and resources to review insurers’ premium increases and make sure they’re reasonable.

Not to mention, health reform will bring important new protections for people in private insurance plans. Many of them, like coverage on parents’ plans for young adults until they turn 26, access to preventive services free of charge, protection against low annual dollar caps on coverage, and coverage for kids with pre-existing conditions, take effect this year.

Instead of lauding these protections as a way to show how health reform will make Americans healthier, insurance companies are using them as a scapegoat for increasing their rates. It might make for good rhetoric, but the fact of the matter is that these new rules designed to protect consumers are necessary for making sure that insurance actually works for the people who need it the most.