Friday, June 25, 2010

Doin' The Math

It's amazing what a little sunlight can do. Today's Los Angeles Times reports that another health insurer has had to pull back from planned premium hikes for individual policies:

A second insurance company in California has killed plans for double-digit rate hikes for individual policyholders because of errors in its filing that would have inflated premiums, state regulators said Thursday.

Connecticut-based Aetna Inc. had sought an average 19% increase in rates for its 65,000 individual customers, but pulled back after multiple math errors in its paperwork were found by its own staff and by an independent consultant working for the state.

For years, insurance companies have been free to raise rates for health insurance with little or no recourse for their policy-holders, and they took full advantage of the ride. They were free to charge what the market would bear. All an insurer had to do was submit a report noting the rate increases to the insurance commission. Nobody apparently ever actually read the report or checked the computations contained in the report to justify the rate hikes.

It wasn't until their gross over-reaching was noted by articles published in the Los Angeles Times and other newspapers that the public got the message that, once again, the free market was ripping them off. The bad press came at just the right time: health care costs and what it was doing to the economy became the focus of the nation for over a year. Horror story after horror story made front pages and got serious minutes on the evening news. Those filed reports suddenly got read by the commissions. They did the math and found the "errors".

Consumers, however, still aren't in the clear when it comes to the insurance companies' rapaciousness. Most state insurance commissions, including California's, don't have much power to regulate premiums.

Even with the new disclosure requirements, regulators have limited authority to block rate increases. They can do so only if insurers fail to spend at least 70% of their premiums on medical claims.

In Aetna's recent rate filing, the insurer said its plan met the 70% minimum. But once the errors were identified, medical-claim spending fell below the 70% requirement. The proposed rates were higher than they should have been, officials said. Aetna notified regulators of its mistakes this week, about the same time the state's consultant reported the problems.
[Emphasis added]

A move is afoot in the California legislature to give the Insurance Commission a little more power to regulate premiums, and that's a start. So is the new federal insurance law which mandates an 80% threshhold for premium dollars spent on medical claims.

Sooner or later, however, the public has to realize that the provision of health care should not be governed by the profit-motive. When that happens, we'll all have a shot at being healthy.

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