President Obama's latest attempt to salvage health care reform, unveiled today, introduces yet another new twist--a proposed federal board that could veto excessive health insurance rate hikes. Politically, the proposal may do something for the president by tapping into popular anger over rate increases as high as 39 percent in California, among other states.
This is the direction insurance rates went even after new state regulation.
Practically, however, a rate board is unlikely to do much, judging by Washington state's experience with similar regulation.In 2008, a backlash against insurance companies prodded the Legislature to give the state Insurance Commissioner's office the power to block rate increases in the so-called "individual market" (the one that has received a lot of attention because people pay for insurance directly rather than having an employer buy it for them).
Even so, the average rate increase in the individual market was nearly 18 percent in 2008. It was nearly that much again in 2009.
Stephanie Marquis, a spokesperson for Insurance Commissioner Mike Kreidler, says her boss's hands were tied. He has to go along with rate increases if insurance companies show that they are paying out more money than they are taking in. And the reality is, Marquis says, that insurance companies lose money in the individual market, which holds just a sliver of the total population, and one that tends to need a lot of expensive care.
Kreidler wanted to be able to look at a company's overall profit--not just in one particular market--when assessing rate increases. But he was denied that authority by the Legislature, Marquis says.
Perhaps Obama's rate board would have that authority; details are still sketchy. Still, Marquis notes, the latest proposal probably won't be significant unless Obama is able to pass other, broader health care reforms.