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Life Health > Health Insurance > Life Insurance Strategies

Feinstein's Federal Rate Authority Proposal Is Raising Alarms In The Industry

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The effort of Sen. Dianne Feinstein, D-Calif., to add a provision to financial services reform legislation now pending in the Senate that would establish a federal health insurance rate authority is raising alarms in the insurance industry.

It is just one among a number of new developments prompted by the historic health care reform legislation that Congress passed last month.

Other developments include a growing trend by insurers to accelerate their offering of health insurance for young adults graduating from college or aging out of their parents’ plan beyond that mandated by the new law.

Meanwhile, by May 3, the Department of Health and Human Services is expected to release interim final guidance on a number of provisions of the reform law, including new plan requirements, coverage of dependents to age 26, plan rescissions and restrictions on pre-existing condition exclusions for children up to age 19.

HHS is also asking for public comment on regulations regarding the development of medical loss ratios and the rate filing process and review of rate increases.

At the same time, the National Association of Insurance Commissioners has formed groups to look at both of these issues, according to industry lawyers and lobbyists.

And, in a new development in that area, WellPoint agreed to a request by the leadership of the three House committees to immediately end the practice of rescission-terminating an individual’s coverage once he or she becomes sick-except in cases of fraud or material misrepresentation.

Under that pressure, industry officials believe that other insurers would also soon agree to comply. The bill mandates that a rescission cease in all plans that go into effect after Sept. 23, which, in practice most likely means early next year, an industry official said.

But, Brett Lieberman, an official of the Blue Cross and Blue Shield Association, said accelerating the end of rescission would likely have little impact. “Rescissions are a very rare occurrence,” he said.

A recent NAIC study, Lieberman said, shows they occur in approximately one-tenth of 1 percent of individual market policies each year.

On another request from the lawmakers, Lieberman said Blue Cross and Blue Shield companies “have long supported third-party reviews of a company’s decision to rescind a customer’s policy.”

He added, “We have just received the committee request and will review the letter and respond to the committee.”

At the same time, the chief actuary of the Centers for Medicare and Medicaid Services issued a report indicating that the new law will likely have a different impact than suggested by other analysts and by Democratic supporters of the bill.

Specifically, Richard Foster, the actuary, said in his report that by 2019, an estimated 13 million workers and family members would become newly covered as a result of additional employers offering health coverage, a greater proportion of workers enrolling in employer plans, and an extension of dependent coverage up to age 26.

However, he cautioned, for a number of reasons, the number of persons with employer coverage in 2019 under the new law will be 1 million lower under the reform plan than under prior law.

Among the reasons for this is that a number of workers who now have employer coverage would likely become enrolled in the expanded Medicaid program or receive subsidized coverage through the exchanges that will be created under the new law.

One of the reasons that is likely to occur, Foster said, is that the per-worker penalties assessed on nonparticipating employers “are relatively low compared to prevailing health insurance costs.” As a result, he explained, “the penalties would not be a substantial deterrent to dropping or forgoing coverage.”

Moreover, he said, because the subsidies currently provided under the Medicare Advantage program will be reduced, “We estimate that in 2017, when the MA provisions will be fully phased in, enrollment in MA plans” will be half its current total, from the projected level of 14.8 million under the prior law to 7.4 million under the new law.

As to her proposal, Feinstein said the provision she wants to add to the bill would give the Secretary of Health and Human Services the authority to see that rates are reasonable.

Officials at the National Association of Health Underwriters and the Council of Insurance Agents and Brokers immediately voiced concern about the provision.

NAHU officials said her proposal “is not necessary” and added that it could in fact “be harmful by trying to take insurance principles further out of insurance.”

NAHU spokesperson Kelly Loussedes said, “Policymakers need to recognize that premium increases are the result of numerous factors, including increases in the price per medical service and greater utilization of services, adverse selection, new medical technology, cost shifting, state insurance taxes and fees, regulatory compliance, the aging of the population, and unhealthy lifestyles.”

In addition, Loussedes said, the new health reform law already contains numerous provisions where insurance rates are already subject to significant oversight and review.

In a note to members, CIAB officials said, “Such a move would inevitably add even greater controversy and polarization to the regulatory reform legislation.”

Most importantly, CIAB officials said, “regulating health insurance rates is simply irrelevant to the issues being debated in financial reform. Such a price-control regime is also substantively objectionable on many levels, not the least of which is that the health reform legislation is based on state-based exchanges, not a single national exchange.”


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