Nebraska, Iowa review insurance rates now

Nebraska and Iowa wouldn’t be directly affected by a national health insurance rate authority proposed by President Barack Obama because the two states already review rates on policies sold to their citizens.

But a national board might resolve situations, even in Nebraska, in which rates on individual policies spiral out of control, said an advocate for Nebraska health insurance customers.

“If the states aren’t going to deal with it, then we take the next step,” said Dick Netley of Omaha, a public representative on the board of the Nebraska Comprehensive Health Insurance Pool.

“I’m frustrated with this whole situation,” he said. “But I’m not sure why the regulatory bodies that are in place out there right now can’t deal with that. For the federal government to step in, this is a big step.”

Under Obama’s proposal, the secretary of health and human services would create a new Health Insurance Rate Authority to work with some state regulators to annually review rate increases. Either the secretary or the states could block increases found to be unjustified, ordering changes or even issuing rebates to customers.

State agencies in Iowa, Nebraska and 23 other states already review rate changes planned by insurers. Obama’s proposal would not supplant existing state review processes, a White House official said.

An officer for Blue Cross Blue Shield of Nebraska, the state’s largest insurer, said the State Insurance Department already does what the president is proposing.

“People 60 miles away look at the financial information and make a decision,” said Pat Bourne, a Blue Cross vice president in Omaha. “Does it make sense to have that decision second-guessed by somebody in D.C.?”

The rate authority is part of an overall proposal that Obama is making this week in an effort to win wider political support for a health care overhaul. Obama’s proposal is similar to one by Sen. Dianne Feinstein, D-Calif., following word that Anthem Blue Cross of California, a for-profit health insurer, planned to raise premiums as much as 39 percent.

Anthem cited rapidly rising health care costs and the effects of a weak economy, which has prompted many young, healthy people to cancel their coverage, leaving older, sicker people in the plans. The results are higher costs and higher premiums.

Nebraska Insurance Director Ann Frohman said Monday that it remained to be seen whether Nebraska or the other rate-reviewing states would work with the authority on a review process.

“It wouldn’t impact our ability to do our job,” Frohman said. “The interplay would happen with those states that do not have rate review.”

Rate review is a complex, technical process that involves dozens of factors that influence rates on insurance policies, she said.

Companies submit detailed information on each proposed rate, showing how much money they collect in premiums, how much they pay to medical providers, and their administrative expenses, profits and other factors. The state also considers whether companies will remain solvent so they can pay the claims under their policies.

Frohman said it would be difficult to set insurance rates on a national basis.

“Insurance is inherently local,” she said. “It’s going to be reflective of the cost of providing medical care in the state.”

Health insurance premiums reflect the cost of providing that care, such as the price of the land under a hospital in Omaha versus the price of the land under a hospital in San Diego.

“That’s all reflected in the insurance rates,” she said.

Bourne, who also is a former state senator, said the nonprofit Blue Cross of Nebraska sets aside less than 1 percent of its revenue for reserves and must seek approval for any rate increases it needs to cover claims and expenses.

“We send in reams of actuarial data justifying the rates that we request,” Bourne said. “State regulators are apolitical, and they look at the numbers and justification for a rate increase or decrease. As political as the whole health care reform has been back in Washington, (a national rate authority) would add a whole element of politics to the coverage that people need.”

Obama’s proposals would not “control the skyrocketing medical costs, which are, in fact, driving premiums,” Bourne said.

He agreed that rising premiums can discourage younger, healthier people from buying into a health plan, in turn triggering higher per-person medical costs and higher premiums. Insurance companies must balance plan benefits and costs to keep rates affordable and to retain a broad spectrum of people within their coverage, he said.

If costs and premiums in a health plan rise out of control “that just kind of highlights why the president’s solution is unworkable,” he said. “It doesn’t do anything to control those claims costs that contribute to the spiral.”

Netley, the consumer advocate, said people trapped in a high-premium “death spiral” health plan should be allowed to switch to the state health insurance pool or should have other remedies. He has frequently discussed the problem with state authorities, but it remains unresolved, Netley said.

On a national level, Netley said, there may be cases of insurers making excess profits through high premiums.

“I don’t think any insurer should be denied a reasonable profit,” he said. “But if it’s not reasonable, then I think it’s something that needs to be looked at,” and a new national authority could make sure rates are justified.

Contact the writer:

444-1080, steve.jordon@owh.com

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