A House bill awaiting a hearing in the House Business Committee has the potential to give the state of Idaho more power than the federal government to regulate health insurance industry pricing practices.
The measure, House Bill 423, seeks to implement a section of the 2010 Patient Protection and Affordable Care Act (PPACA), which allows the federal government to deem certain insurance premium increases as too high.
But the Idaho Department of Insurance (DOI) wants to keep insurance companies from charging too little, as well.
As part of the health reforms, the federal government gave itself the power to review all health insurance rate increases of more than 10 percent and make that information open to the public. The idea is that insurance companies need to justify that they’re paying for health costs, and not realizing excessive profits, spending too much on administrative expenses or pricy ad campaigns.
Last May, the federal government announced the creation of the rate review rules and lauded the process. “Effective rate review works—it does so by protecting consumers from unreasonable rate increases and bringing needed transparency to the marketplace,” said Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, the federally agency administering the PPACA.
In fact, the title of the section of the PPACA covering the process is entitled “Ensuring that consumers get value for their dollars.”
The federal section of code, however, only deals with companies that have what could be deemed excessive or unfair rate hikes. The legislation before state lawmakers addresses that, but would give DOI the power to say if rate hikes are too low.
“A premium rate is excessive if it is unreasonably high for the coverage provided,” the legislation states. “A premium rate is inadequate if the rate is unreasonably low for the coverage provided and the continued use of the rate would endanger the solvency of the insurer or disrupt the insurance marketplace.”
The proposed legislation allows, through creating agency rules, DOI to decide exactly what it believes are unfair, unreasonable or discriminatory rate increases. After DOI reviews rate increases, the state must give each hike a rating of “Unreasonable rate increase” or “Not unreasonable,” a score available to the public at large.
DOI is already conducting these types of activities, but the legislation would install the wording into state law. The feds started reviewing Idaho health policies last year but turned the process over to the state after Gov. Butch Otter issued an order allowing the switch to be made.
Neither the federal government nor the state, if the legislation passes, has direct authority to stop rate hikes or punish companies that push coverage costs too high. The determinations are instead published on a website, allowing consumers to research the determinations.
There could, however, be one indirect penalty for raising rates higher than the government prefers. Federal rules suggest that a history of rate increases higher than the government deems appropriate may exclude health insurance carriers from participating in an exchange program, essentially a statewide online marketplace.
Rep. John Rusche, D-Lewiston, said it is acceptable, and even preferable, to allow DOI to review rate increases because Idaho-based insurance carriers would rather deal with the state than the federal government.
As for making sure rate increases are high enough, Rusche says companies often low-ball premiums for a short period of time, only to increase them later. “You can only operate at a loss for so long,” Rusche said, adding that companies could also lower rates to gain more customers in order to have a larger bargaining chip when arranging service contracts or other deals. “The more lives you have, the bigger your stick when you go out to negotiate contracts.”
House Bill 423 will likely receive a hearing in the House Business Committee within the next week or two, but it will be the subject of study Tuesday. Rep. Janice McGeachin, R-Idaho Falls, has commissioned a group to study the PPACA and said Monday that it will study the measure at its regularly scheduled meeting Tuesday.