Massachusetts Trumps California in Health Insurer Rate Hike Response
By now most of us have heard the hullaballoo about California’s Anthem Blue Cross raising its individual plan rates by 39% or more. But this isn’t an isolated incident. Many insurers, including Health Net, Aetna, and Cigna, have jacked up their rates for 2010 due to a rapid increase in healthcare costs or other purported excuses. It may be surprising information to healthcare reform ostriches, but to those of tuned in to the accelerating US healthcare disaster, it’s old news. More interesting are the responses coming from Washington, D.C. and state politicians.
Kathleen Sebelius of Health and Human Services demanded that Anthem justify the hikes. I’m sure Anthem is scared. California’s response also left me underwhelmed. Legislators announced probes into insurer rate hikes, and Democratic state senator Mark Leno announced plans for legislation to require insurers to disclose reasons for rate hikes and coverage denials. These reactions can be categorized as impotent at best: frown, scream, yell, and hold press conferences while letting the perpetrators off the hook. Not impressive.
Contrast those retorts to that coming from Massachusetts governor Deval Patrick. The leader of this universal healthcare state wants to give the insurance commissioner veto power over healthcare rate hikes that exceed the rate of medical inflation. That includes not just insurance cost gouging, mind you, but also provider rates abuse. Patrick has literally crafted a bill that allows healthcare price caps throughout the state. Far from impotent, that response approaches omnipotence.
Why would he do this? Providers are as big a drain on healthcare resources as insurers, a fact that has been swept under the rug during the healthcare reform debates. Massachusetts recently uncovered a well-known healthcare industry “secret”: it is provider market clout, not cost shifting (charging private insurers more to compensate for lower public insurance reimbursement rates), that drives healthcare costs.
Existing inequities in provider reimbursement due to closed-door deals like that between Partners Healthcare and Blue Cross Blue Shield, which resulted in Partners being paid two times what competitors are for the same services, are a primary driver of pay for performance resistance. Why should lesser compensated competitors put their revenue on the line when Partners can provide low-quality care and still be paid more?
Meanwhile, while the bill makes its way through the legislature, Patrick put an immediate emergency measure in place requiring insurers to file proposed rate increases with the state for review 30 days prior to taking effect. He realizes his constituents are drowning in healthcare costs, and he’s doing something about it. Score one for universal healthcare.
Believe it or not, that’s what other developed nations do under their universal healthcare systems. They proactively address cost increases to continue providing affordable care to everyone. Beltway denizens take note – consolidated influence is a good thing when it counteracts capitalistic money-grubbing at the expense of a country’s health.
UPDATE: Anthem has agreed to delay its rate increases until May 1, pending actuarial review. However, this isn’t a great “solution” — the insurer will merely roll the expected revenue increase into next year’s premium hikes!
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Developed countries that use private insurers regulate their insurers’ profits. Their social contracts make it criminal to pad premiums to generate profits. As a countermeasure, they shift risks (as in the Netherlands) so companies do not have to go under in the course of carrying out their public function.
With the purchase of health insurance nationalized, voters will demand their money’s worth and that will translate into the enforcement of cost controls that favor 90% medical loss ratios and higher benefit rates.
Martin–I agree, universal healthcare has demonstrated (universally) that covering everyone efficiently increases access to quality care for much less cost.
It’s sad that the low bar Anthem has to meet for auditors is a mere 70% MLR to justify its rate hikes. A full $0.30 of every $1.00 Anthem health plan members spend goes to anything but their healthcare.