Obama To Propose Federal Board To Control Health Insurance Rates

This will be controversial, to say the least. I wonder on what legal grounds this will be asserted - and how long it will be before the insurance co

This will be controversial, to say the least. I wonder on what legal grounds this will be asserted - and how long it will be before the insurance companies lobbyists stop it. (I also wonder why he didn't support the public option, which would have been less directly interventionist than this, and thus, less politically risky.)

You can read the details here:

President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said.

[...] The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, and it would create a new Health Insurance Rate Authority, comprised of health industry experts that would issue an annual report setting the parameters for reasonable rate increases based on conditions in the market.

The legislation would call on the secretary of health and human services to work with state regulators to develop an annual review of rate increases, and if increases are deemed “unjustified” the secretary or the state could block the increase, order the insurer to change it, or even issue a rebate to beneficiaries. States would be eligible for a portion of $250 million in grants to finance premium review and approval.

The new rate board would be composed of seven members, including consumer representatives, an insurance industry representative, a physician, and other experts such health economists and actuaries, the White House said. The board’s annual report would offer guidance to the public and states on whether rate increases should be approved.

The corporatist-friendly RAND think tank issued a 2004 report on a similar proposal in California, warning of unintended consequences:

This issue brief evaluates why health insurance premiums are rising and examines the potential long-term consequences of regulating premium costs, using examples from other insurance products such as automobile coverage and workers compensation. The findings underscore that if health care costs continue to rise while premiums are frozen, stringent rate regulation could lead to undesired consequences. These include:

* In the short term, insurers could balance their losses by reducing the quality or quantity of care -- or both.

* Insurers could discourage unhealthy consumers from enrolling in plans, thus increasing the number of uninsured over time.

* If costs continue to rise and premiums are fixed, insurers may exit the market entirely.

* Over the longer term, regulation could discourage expensive treatments and technologies, no matter how beneficial, from coming to market. (A desirable related consequence is that premium regulation could motivate the introduction of cost-saving technologies.)

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