Politics

Sebelius threat heightens concerns over Obamacare price control regulation

Jonathan Strong Jonathan Strong, 27, is a reporter for the Daily Caller covering Congress. Previously, he was a reporter for Inside EPA where he wrote about environmental regulation in great detail, and before that a staffer for Rep. Dan Lungren (R-CA). Strong graduated from Wheaton College (IL) with a degree in political science in 2006. He is a huge fan of and season ticket holder to the Washington Capitals hockey team. Strong and his wife reside in Arlington.
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When President Obama’s top health care official, Health and Human Services Secretary (HHS) Kathleen Sebelius, sent an aggressive letter to the health insurance industry threatening “zero tolerance” for “unjustified rate increases” in early September, it was no empty posturing.

Sebelius’s agency is steadily working on a new regulation that will define when price hikes issued by insurance companies are “unreasonable” and, in at least some cases, illegal.

The regulation and its potential implications have been known for months. But industry sources say the Sebelius threat, coupled with aggressive new rules in California, are heightening concerns regulation will end up comprising politically controlled “price controls.”

Meanwhile, consumer advocates pushing HHS for a strict interpretation of the law’s vague requirements say they are generally pleased with how the regulation is developing.

An organization representing state insurance commissioners is busily working on its recommendations to HHS on the regulation, which they will discuss and potentially approve at an upcoming conference in Orlando, Fla.

States are primarily working on what information insurance companies will need to disclose in the event their premium increase is deemed “unreasonable” under the law.

A draft 10-page form to be filled out by insurance companies would require them to isolate out which portion of a rate increase is due to increased administrative costs, medical costs, changes in benefits, and so on, among many other things.

Advocates hope the information will shine light on why insurance rates are increasing so quickly and level the playing field for consumers.

“We haven’t had a market with a willing buyer with full knowledge of the market and a willing seller, instead we’ve had insurance companies in the driver’s seat,” said Joseph Ditré, executive director of Consumers for Affordable Health Care.

But a more contentious part of the regulation involves the government reviewing whether to allow a price increase set by the companies.

Since asking the public for comment in March, HHS has provided few, if any details about how that process will work.

Under Obamacare, the federal government does not have the authority to deny an insurance price increase.

However, states do have that authority. On Aug. 16, HHS awarded California $1 million to implement its “unreasonable” rate review program. Insurance industry sources warn broad new authorities planned for California’s implementation could signal the Obamacare provision will be implemented extremely aggressively.

One HHS source appeared to confirm California is setting an important precedent. “A growing number of states” have the authority to deny price increases, the source said, the health care law “will help them increase those efforts as well as help other states establish that authority.”

Critics charge that the government denying price increases on private industry would constitute “price controls” and warn the provisions could lead to either rationing or insurance companies going out of business. They point to Massachusetts’s experience with insurance price controls as a cautionary tale of what happens when pricing “turns political.”
In Massachusetts, Democratic Gov. Deval Patrick’s administration implemented strict price controls on insurance premiums under that state’s health care law.

Obama’s health care plan is in many ways based on the Massachusetts law, and Patrick shares with Obama a top political advisor in David Axelrod.

However, Massachusetts’s price controls did not work out as planned. E-mails later showed top state officials warning the controls would have adverse consequences, including undercutting the solvency of the state’s insurance companies.

“HHS will be working with states, insurers, insurance commissioners and other stakeholders to write the rules so that they help to strengthen the market, provide more choices to consumers, lower costs, and empower states,” said HHS spokeswoman Jessica Santillo.