One econ major. Three (or more) opinions.

We’ve been running a lot of articles this year about state insurance regulators tinkering with health insurers’ 2015 individual rate proposals.

Regulators in states like Connecticut and Maryland are disagreeing with the medical cost trend figures insurers use, or how the insurers account for support from the Patient Protection and Affordable Care Act (PPACA) risk management programs.

On the one hand, for consumers and small employers, watching state insurance regulators cut increase requests is satisfying. Big insurers have been highly profitable in recent years, and they get help with fattening their profit margins from big regulatory moats that shut out would-be competitors. 

But, on the other hand, PPACA World has made predicting how health care prices, use of health care and commercial health insurance claims will perform especially this tricky year and next year. Insurers have no good way to know, for example, whether Congress will let the PPACA risk-management programs pay what they’re supposed to pay, in full, on time. Even if Congress leaves the programs and their funding alone, who knows whether insurers, state regulators and the U.S. Department of Health and Human Services (HHS) program managers will calculate the risk program payments the same way?

What if Ebola finds its way to the United States? What then?

It seems as if regulators get all of the cheers from insurance buyers for holding rates down, but they assume none of the risk involved with potentially keeping rates too low.

On the third hand, maybe there could be a way to get the rate regulators to assume some of the risk involved with holding rates too low. Everyone loves to talk about how great it is to give older people on Medicare and poor people in Medicaid “skin in the game.” Why not give regulators skin in their game?

One possibility: Tie part of the performance of the assets backing insurance regulators’ pensions or retirement accounts to health insurer underwriting losses. If three-quarters of the health insurers get profits within a targeted range, the regulators get a bonus. If the profits rise too high, some of the bonus goes away. If more than half of the health insurers lose money due to the regulators’ rate cuts, the regulators lose money.