Rate Regulation Blow-up in California

WellPoint and co. win again

The big news in health reform last week was the insurance industry’s victory in the California legislature, which scotched any possibility that the state—one of twenty-four that does not have power to reject rates regulators say are too high—would actually curb the industry’s excesses. Health reform advocates and consumer groups had hoped a rate regulation bill would give California’s insurance commissioner power to reject or modify proposed increases that his department found excessive, inadequate, or discriminatory. (The commissioner can review rates but can’t stop a carrier from charging them.) In other words, under the proposed legislation, the next time WellPoint came in with a 39 percent rate hike, the state could order the company back to its actuarial models to come up with something lower.

It was just about a year and a half ago that WellPoint’s announcement of a 39 percent rate increase gave health reform the boost it needed for final passage. The public was outraged; the press had a new villain to report on; the state’s congressional delegation denounced the company; the president of the United States was angry; and Kathleen Sebelius, his secretary of Health and Human Services, was positively gleeful. WellPoint’s stumbles were the gift that kept on giving, she confided to one lobbyist. WellPoint’s “greed” became the rationale for enacting reform, which would have ended such practices once and for all.

While the press made a big deal out of the WellPoint story then, it did no such thing this time. The issue is super-important, but you’d never know it from the press coverage, which at best was perfunctory and rarely illuminating. The brief stories informing Californians what went on in Sacramento were laced with predictable quotes and comments from the parties involved, which I’ve heard zillions of times before when industry resisted regulation.

The website healthycal org told us that the chief spokesman for the state’s health plans called the bill “deeply flawed.” A McClatchy story reported how industry opponents argued that “there are sufficient consumer protections on the books and that the change would not address the root cause of rising costs.” The San Francisco Chronicle noted that Commissioner Dave Jones believed “we’ve made a lot of progress on this critical bill, having moved it to the Senate floor. The bottom line is that the work is not over.” The Los Angeles Times reported that doctors and hospitals feared rates would be “artificially low,” leading to reduced payments services and physicians who wouldn’t treat patients. How many times have they trotted out that argument?

The stories were mostly the “who, what, when, where” stuff. The “why” was generally missing. But it’s the why and the context that makes this a major story that deserved better from the media. The industry has no intention of being a target for tough, consumer-friendly laws. Was California dreamin’ when the state insurance Commissioner Jones and some consumer-minded law makers thought they might bring WellPoint, Kaiser Permanente, Blue Shield, and the rest to their knees? This is the third time this year that health insurers have won big in the states that have attempted to tighten the regulatory screws, and reporters dipping into this subject should weave this history into their stories.

In Maine, former insurance superintendant Mila Kofman challenged rate hikes proposed by Anthem Health Plans, a WellPoint subsidiary, using her authority under what was the state’s tough rate regulation law. But the industry put an end to that when it got the legislature to eliminate rate regulation for policies sold in the individual market and to small groups, a move that effectively deregulated Anthem’s policies. As Campaign Desk reported, the media in Maine didn’t do such a hot job of covering this drama either.

In Connecticut, the industry prevailed upon Gov. Dannel P. Malloy
to veto a controversial measure that would have created a new public review process when insurers proposed rate increases for health and long-term-care policies. The governor argued the bill could have a “significant long-lasting negative impact on Connecticut’s residents, by driving out competition in the state’s insurance market.” I guess he meant that if rates got too low, the bottom feeders might move to another state that was more hospitable. Insurers opposed the legislation arguing that the state’s existing review process was already “quite robust.” Translation: they could get what they wanted with the status quo.

One story showed what news outlets can do, if they want, to clearly explain the ins and outs of these legislative battles. A piece by Arielle Levin Becker, a health reporter for the Connecticut Mirror, an online start-up, gave enough context, background, and explanation for state residents to learn whose side the governor was on.

Judging from the experiences of California, Maine, and Connecticut, the clout of the insurance industry remains undiminished despite all that happy talk from Obama administration officials at the tail end of the health reform debate and now. Once we got reform, the pols told us, states would get money from the feds to beef up their examination of these kinds of rate increases, and policyholders would benefit from lower premiums. It’s worth recalling that in the final weeks before Congress passed the Affordable Care Act, the industry made sure that the federal government had no authority over rate increases and could use only moral suasion to make insurers accept smaller increases. Apparently the government has had some success. But jawboning is no substitute for regulatory authority.

At the end of last week the feds announced they would review any rate increase that was more than ten percent—but, of course, they can’t force insurers to lower the rates if they find they are out of line. Instead the government will post increases and an explanation for them on a government website, healthcare.gov. In announcing the new rule, Sebelius said “rate review will shed a bright light on the industry’s behavior and drive market competition to lower costs.” That is, of course if the public can wade through all that actuarial mumble jumble in a rate filing.

In another era with different kinds of business problems, a reporter asked railroad baron William Vanderbilt why he was discontinuing a fast mail train that the public liked. “Because it doesn’t pay,” Vanderbilt replied. “If the public wants the train, why don’t they support it?” “Are you working for the public or for your stockholders?” the reporter pressed. “The public be damned,” said Vanderbilt. At least back then, the reporter asked the right question. Today reporters should be asking: Without regulation, who limits what insurers can charge? Will the public be damned?

Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , , , , ,