Arizona health insurance rate requests to come under federal review

WASHINGTON – The federal government will start reviewing proposed health-insurance rate increases in Arizona next month, after determining that the state has an “ineffective” rate-review plan.

Arizona is one of 10 states where a proposed premium increase of 10 percent or more for individual or small-business coverage will be subject to review by the U.S. Department of Health and Human Services beginning Sept. 1.

The federal oversight is part of the health-care reform act that was signed into law in March 2010. It calls for Department of Health and Human Services and the Centers for Medicare and Medicaid Services to review rates above the “trigger” of 10 percent and for companies “to publicly disclose the proposed increases and the justification for them.”

The department will not be able to halt any proposed rate hikes, it will only be able to require that the insurer provide additional justification. The goal is to make increases more transparent and easier for consumers to understand, said a department spokesman.

But state officials and insurance executives in Arizona doubt that federal involvement will do anything except add a layer of bureaucracy.

“Generally, when the government involves itself, it doesn’t end well,” said Matt Benson, a spokesman for Gov. Jan Brewer. He said the governor believes “it is better to leave matters of private insurance to private industry.”

That is largely what the state does now.

Currently, insurers are required to file any rate-increase requests with the Arizona Department of Insurance, giving reasons for the proposed higher rates. The department, like the feds, does not have the power to reject any proposed increases, no matter how high.

Diane Brown of the Arizona Public Interest Research Group welcomed the federal intervention in Arizona, saying it will lead companies to “justify their increases” and “reduce inefficient and ineffective costs.”

She believes federal oversight will let Arizona consumers see rate numbers disclosed for the first time and provide an “apples to apples” look at available coverage.

“Consumers should be able to compare costs themselves, but when information is not readily available or in terms easy to understand, or when there aren’t direct comparisons, it makes it much more challenging for the average consumer to know what the best option would be,” Brown said.

“If the state isn’t providing it, we appreciate that the federal government will,” she said.

But John Rothstein, a broker who owns Arizona Benefits Advantage, is not confident that federal involvement will make any drastic changes for consumers. He does not believe that showing consumers why a company has chosen to increase its rates will change their minds.

“I doubt consumers are going to feel any reassurance that that’s OK,” Rothstein said, referring to premiums that are justified in federal filings.

Rothstein and Ruthann Laswick of Black Gould and Associates both see the benefit in government oversight, but would prefer state-level regulation.

Laswick fears the federal government cannot have an accurate idea of what each individual state is dealing with and will not be able to determine how companies should set premiums.

“They cannot possibly be experts in all 50 states,” she said. “We don’t know that they’re going to look at it at a state-by-state level.”

Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, believes federal oversight will not get to the root causes of health-care cost increases.

He said rising medical costs are not enough of the health-care reform conversation and that rate review is just another way “to ignore the harder decision of rising medical costs.”

Because the feds lack the local market knowledge that state governments provide, Zirkelbach said, reviews are “going to add more complexity and costs for consumers.”

He said these review regulations need to be “an objective actuarial analysis” and not a “duplicative layer of rate review out of Washington.”

States subject to federal review of individual rates and small-group market health insurance rates.
• Alabama
• Arizona
• Idaho
• Louisiana
• Missouri
• Montana
• Wyoming

States subject to federal review of small-group market health insurance rates.
• Iowa
• Pennsylvania
• Virginia