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Democrats Say a 'Bright Light' and Tough Oversight Will Battle Limit Rate Hikes

By Jane Norman, CQ HealthBeat Associate Editor

April 30, 2010 -- Democrats kept health insurance companies on the run Friday after insurers under pressure in recent days agreed to early implementation of key changes mandated in the health care law and WellPoint canceled a hugely publicized proposed 39 percent rate increase.

But the law's supporters also sought to answer the nagging question of how the new law will curb future rate hikes for consumers, a development that could prove problematic in selling many still-skeptical Americans on the benefits of the overhaul. Premium increases are not prohibited in the law, but other provisions such as a cap on how much insurers can spend on administrative and marketing expenses — known as the medical loss ratio — will be effective in keeping down rate increases, Democrats said.

Democratic Sen. Al Franken of Minnesota and Rep. Jan Schakowsky of Illinois vowed in a conference call to maintain tough oversight of insurers, warning that hikes in premiums might rekindle interest in Congress in imposing a public option in insurance exchanges.

In addition, Health and Human Services Secretary Kathleen Sebelius said in an HHS webcast that the administration has already succeeded in forcing change by "shining a bright light on insurance company practices that, quite frankly, have been going on for years." Nancy-Ann DeParle, the director of the White House Office of Health Reform, hit on the same themes in a blog post.

The continuing Democratic onslaught came after many insurers said they would end policy cancellations for sick people, known as rescissions, and allow expansion of family coverage to include young adults prior to Sept. 23, when such coverage would become mandatory under the law. Both Sebelius and leading congressional Democrats had strongly urged the moves by the companies.

Anthem Blue Cross of California, a unit of the health insurance company WellPoint, on Thursday also canceled a proposed premium increase of up to 39 percent for some policyholders after state regulators criticized the method in which the rate hike was computed. WellPoint came under heavy fire from Sebelius for that proposed increase as well as recent news reports that it targeted breast cancer victims for policy cancellations.

Franken and Schakowsky spoke on a call organized by liberal-leaning Families USA. Ron Pollack, head of the group, said the nonprofit, which was deeply involved in shaping the new law, will organize a series of calls with reporters aimed at explaining different pieces of the new law. Democrats have said repeatedly that the public doesn't understand the health care law and has been subject to misinformation, a problem that could loom large as the nation heads toward midterm elections in November.

Franken said small-business owners with whom he has had contact in Minnesota and "who tend to get their information from more conservative sources" didn't know about the small-business tax credit provision, for example, that will assist small businesses with their insurance costs and kicks in immediately.

The new law, though, does not bar premium increases because that provision was not included in the original Senate version of the health overhaul and due to procedural issues couldn't be included in the reconciliation bill approved separately. Schakowsky, a member of the House Energy and Commerce Committee, said the new law does set the foundation for a process, and now premium increases will be exposed because they will have to be posted online.

In 2014, companies that have high premium increases can be banned from taking part in the exchanges, she said. "Insurers that want access to the customers that are going to be in the exchange are going to have to have more reasonable premiums," she said.

Schakowsky is a sponsor of legislation pending in Congress that would impose a federal rate authority over insurers (HR 4757, S 3078) by giving the secretary of HHS the ability to moderate or block premium increases. She said that in 24 states the insurance commissioners don't have the authority to address rate increases. "We are going to have to do a lot of work to monitor the insurance companies," she said.

If insurers raise their rates, "it could rekindle a consideration of things like providing a public option that would provide the kind of competition to the insurance companies and could bring costs down," added Schakowsky.

Franken said rate increases won't pose a problem for Democrats with voters who might have expected to see their premiums go down thanks to the new health care law. "The purpose of this was to slow the growth," said Franken.

"We know that premium rates are going to continue to go up; they're not just going to go up at the unsustainable pace that they were going up," he said. "You can't expect things to be going up at the incline that they were and then suddenly just go down. . . . If we did nothing, it was just going to be unsustainable."

Franken also pointed out that under the new law insurance companies will have to adhere to a medical loss ratio of 80 percent in the small-group market and 85 percent in the large-group market. That means that those percentages of the company's premium revenues have to be spent on providing health care. Franken said the National Association of Insurance Commissioners will be called on to write the definitions of the law, which is key. "I encourage health reform supporters to weigh in on the discussion," he said.

In her blog post, DeParle said that the insurance commissioners have agreed to move up their proposal on the definition to June 1 rather than December at the urging of Sebelius. "For too long, insurance companies could spend your premium dollars on things like CEO salaries, advertising and overhead — instead of improving care and improving patient health," said DeParle.

And in the HHS webcast, Jay Angoff, the newly named director of the Office of Consumer Information and Insurance Oversight, said the medical loss ratio provision will "force insurance companies to become more efficient."

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