If President Obama's proposal for federal regulation of health insurance rates becomes law, rates for individual policyholders likely would still climb, experts said Monday, but not by as much as insurers might want.
Roughly half the states have the power to limit or block rate hikes for individual health insurance customers. Initial increases generally get knocked down by state officials, often substantially, based on recent cases.
And holding down rates below the level where insurers could make a fair profit would only drive many out of the market, consultants and analysts said, reducing competition and reducing access — the opposite of what the Obama administration has been seeking.
"It obviously is to their advantage to have plans" stay in the market, said Karen Davis, president of the Commonwealth Fund, a private, independent group that researches health system performance.
Earlier Monday, President Barack Obama proposed a nearly $1 trillion health care overhaul that would allow the federal government, working with the states, to deny or roll back excessive insurance premiums. Insurers have been taking a black eye recently over proposed premium increases for individual customers of 39 percent, even 56 percent, in California and Michigan, respectively.
"I certainly think it's needed because insurance rates are so concentrated, with just a few big companies (operating in many states), that they don't yield competitive premiums," Davis said.
For consumers, the biggest benefit of the president's proposal would be in states that currently have no power over health insurance rates for individual policyholders, said Sandy Praeger, chairwoman of the health insurance and managed care committee for the National Association of Insurance Commissioners.
That includes California, where WellPoint Inc.'s Anthem Blue Cross subsidiary set off the current furor over individual rates with its plan to hike health insurance rates by up to 39 percent for about 700,000 individual customers there.
Creating a level national playing field, with standard consumer protections such as a ban on excluding people with health problems, would benefit consumers everywhere, said Hannah Pingree, Speaker of the House in Maine.
She said individual rates are high there because it already has such a ban and the state is "poor, rural and elderly," but insurance regulation has limited increases.
Praeger said details of Obama's plan are unclear, but that "you can't artificially keep premiums down without pushing the companies into financial jeopardy, or they have to find other ways to manage costs, and these will be very anti-consumer, I'm afraid." She cited denying claims, finding ways to rescind policies or hiking copays and deductibles.
"I think it'd be hard to put a hard-and-fast rule in that said you can't raise rates more than a certain percentage," she added.
Experts said a more reasonable approach is limiting how much of premiums can be spent on administration and profit, as the Senate Democrats' plan does.
Too-tough limits on rate increases could hurt consumers, some said.
"If we regulate too tightly, it could very well be insurers will not do business in the states," said Michael Turpin, a vice president at insurance broker USI Holdings and a former executive with United Healthcare. "It would be unrealistic to expect a for-private insurer to operate as a nonprofit."
Ira Loss, senior health care analyst at Washington Analysis, recalled that after the Balanced Budget Act of 1997 put a 2 percent cap on annual rate increases for Medicare managed care plans, many insurers withdrew from the program.
However, Davis, of the Commonwealth Fund, doesn't see federal regulation driving out insurers.
"There are a lot of companies that aren't going to walk away from a new market," she said, that includes about 30 million Americans the Obama plan estimates would be added to the insurance rolls.
That could have a downside, said Bob Laszewski, head of Health Policy and Strategy Associates in Washington.
"If you put 30 million more people in health care without controlling demand, it will only drive costs up," he said.
Given the required public comment and other steps to create a new government bureaucracy, it could be years before the new agency is up and running, said Dan Mendelson, chief executive of Avalere Health, which advises businesses and other groups on dealing with the health care system. By then, he said, insurers may have positioned themselves better by cutting their administrative overhead and pushing hospitals and doctors to hold down care costs.
That's the one area where experts of all stripes are in agreement.
"We have to control costs" to hold down premiums, Praeger said.
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