The ACA and insurance rate hikes

Dismissing national news of huge health insurance premium increases before a Tennessee audience, President Obama urged people to “stay on your insurance commissioner, pay attention to what they’re doing.”

Toward what end?

When the Affordable Care Act was before the Senate Finance Committee, those opposing a public option defended the ability of state regulators to control private insurance costs; yet, as Sen. Charles Schumer (D., N.Y.) asked, “If the State Insurance Commissioners are doing such a good job, then why are costs going through the roof?”

Over five years later we might ask the same question.

Control of premium rates was left out of the ACA by design.  Following the ACA’s passage, the then-Democratic Senate refused to even hear a bill offered by Sen. Dianne Feinstein (D-Calif.) to allow the federal government to block unreasonable rate increases where states cannot.

There is no effective rate review in the largest two states, California and Texas, and in four others, Alabama, Missouri, Oklahoma, and Wyoming.

Last fall, a California ballot measure to allow such review was crushed by over $56 million in health insurer spending, along with allied Democrats like House Minority Leader Nancy Pelosi (Calif.), whose claim that rate review would “kill the Affordable Care Act” was repeatedly aired in insurer ads.  Alone among states, the Covered California exchange is keeping proposed 2016 rates secret.

Many governor-appointed insurance regulators hail from the industry that they regulate – an industry to which they return following their political patrons’ retirement or defeat.  It’s not unreasonable to wonder how aggressive such regulators are in controlling costs.  A number had even sought waivers from the ACA’s modest requirement that 80 percent of individual market premiums go toward medical costs – they viewed a 20 percent margin as too lean.

That last point is telling.  Since the ACA passed, for example, the stock for the largest insurer, UnitedHealth Group, has almost quadrupled.  Other multi-state insurers, already so much more sophisticated than the state regulators charged with corralling them, are consolidating into even larger behemoths: Aetna is buying Humana for $37 billion, after having devoured Coventry for $5.7 billion, while Anthem is still wooing Cigna after its $47 billion offer was rebuffed.  Such mergers enjoy an antitrust exemption based on the antiquated notion state regulation suffices.

Having been allowed by compliant regulators to narrow networks, and charge deductibles that have some paying $6,600 just to access care, it’s logical insurers are now moving toward higher premiums.  The fact that 2016 is a presidential election year will silence Democrats unwilling to acknowledge the ACA’s shortcomings, though they must wince in recalling the fate of former Sens. Mark Begich (D-Alaska) and Kay Hagan (D-N.C.), defeated after news of 2015 premium increases, 37 percent and 13.5 percent respectively, by their states’ dominant carriers.

Furthermore, there are many instances where increases are warranted because of President Obama’s improvident, belatedly-kept, promise that consumers could keep pre-ACA health plans.  Where state regulators allowed them to do so, healthy consumers stayed put – which meant exchange offerings aggregated populations with costly medical needs.  Thus, in a state with aggressive rate review like Oregon, the insurance commissioner has already approved a 25 percent increase for the largest exchange plan and 33 percent for the second-largest.
For two years Obama pretended premium rates are the only health insurance costs that matter – ignoring high deductibles or out-of-network costs to which the much-ballyhooed ACA tax subsidies are inapplicable.  If premiums go up, it’s a failure attributable to the architecture of the ACA, not the foreseeable failures of state regulation.

Williams, a Washington attorney, is a former deputy insurance commissioner and author of a book on the ACA.