The Meaning of Rate Review
This is Robert Book, writing at the Apothecary:
The Affordable Care Act does not define what it means for a premium increase to be “unreasonable,” but the administration defined it in a regulation issued in May. An increase is defined as “unreasonable” if it is “more than 10%.” (76 FR 29964).
So, if a health insurer increases rates by more than 10%, that’s “unreasonable.” What if costs of the underlying health services they pay for increase by more than 10%? Still unreasonable. What if their patients got sicker, and required more than a 10% increase in services? Still unreasonable. What if they need because regulators made additions the list of preventive services – that must now be covered without copays? Still unreasonable. What if they need the money to pay their share of the new $8 billion tax on health insurers? Well of course that’s unreasonable. What if they use the rate increase to pay for golf tournaments for executives? Well, that’s not treated any differently – it’s reasonable if the increase is 9.8% and unreasonable if it’s 10.2%.
Beam me up Scotty. There’s no intelligent life down here.
Wow. Choosing an arbitrary term (“unreasonable”) and attaching false objectivity to it (10%, that’s a nice, round number!) has to rank among the worst ideas of 2011.
It’s unreasonable to draw an arbitrary line on limits. If the market decided, it would all take care of itself.
I didn’t read the underlying article, but I’m guessing that they didn’t evaluate the other side of the coin: if 10% is the border of “reasonable,” then insurance companies have no incentive to increase rates by anything less than 9.9%, even if costs are lower.
“So, if a health insurer increases rates by more than 10%, that’s “unreasonable.” What if costs of the underlying health services they pay for increase by more than 10%? Still unreasonable. What if their patients got sicker, and required more than a 10% increase in services? Still unreasonable.”
I think rate hikes greater than 10% are subject to review, but not prohibited. As a result, if patients were demonstrably sicker and required more than a 10% increase in services, I’m sure it would be approved. I don’t see that being much of a problem.
I’m a property/casualty actuary. I can testify that the behavior of regulators is just as arbitrary as the post implies. They have no regard whatsoever for the underlying costs of supplying insurance. They often don’t care if they drive insurers to insolvency. The funny thing is, an actuarially indicated rate increase is often knocked down by management, and this lower rate increase is STILL declined by the regulator. My impression is that they really don’t care.
I occasionally have to answer the questions of ignorant regulators, who have somehow been charged with regulating things they obviously don’t understand. I’ve received a few howlers in my short time in this profession.
“What if costs of the underlying health services they pay for increase by more than 10%? Still unreasonable.” Put them like the bunch of garbage hell who think and maintain this type of cheap theory.
This is why pay-as-you-go health insurance is not sustainable.
Whether or not you have claims, you are starting over, other than having an HSA.
What we need is a supersized HSA, which can provide $25,000-$50,000 in benefits in 2 to 4 years.
That way, the deductible can be increased on the secondary, tradional, pay-as-you-go plan to start where this supersized HSA leaves off.
A deductible of $50,000 lowers the traditional premium about 80%.
Don Levit
Don Levit
A price control by any other name — whether that be Rate Review or something else — is still a price control.