The recent announcement by the federal government that it will require health insurers to seek its approval for any “unreasonable” rate increases continues to put the squeeze on health insurers as they try to adjust their business models to cope with the pressures of Obamacare. While these attempts at health insurance price controls may seem like a good idea to consumers, their net effect could be the erosion of access to medical services that may no longer be covered by insurers.
This latest announcement from the Department of Health and Human Services comes on the heels of its warning to insurers last summer that high premium increases could result in their exclusion from the insurance exchanges. Since the passage of the health care law last December, most major insurers, in direct response to the new law, have increased premiums or proposed plans to do so, some in excess of 35%.
Obamacare: Your Insurance Rates Will Go Down. Really?
These immediate rate increases and predictions of more to come are not the response that the Obama administration wanted to see at a time when it still is trying to convince the public that the health care law will result in lower premiums. Such has not been the case, and all indications are that insurers will continue to press for premium increases as more of the law’s provisions go into effect.
The new requirements will establish a state and federal oversight of insurers rate increase proposals on individual and small group plans that exceed 10%, above which may be deemed as “unreasonable” unless otherwise justified by the insurer. If an insurer demonstrates a pattern of excessive premium increases, the state may exclude it from the insurance exchange. The federal government reserves the right to step in if it determines that the state’s review was not sufficient.
Insurance Rates vs Coverage – Something Has to Give
As the government steps up its oversight and keeps its downward pressure on premium rates, the insurers will be forced to cut their costs, which means the possible elimination of certain covered services and treatments. Within the first 9 months of the law’s enactment, insurers have already dropped maternity coverage, child-only policies, and mental health coverage. For consumers, they may benefit from caps on premium increases; however, their access to medical services may suffer as a result.
The tug of war going on between the insurers and the federal government over insurance premium rates will do little to address the core issue of reigning in medical costs. Rising insurance premium rates are merely a symptom of the much larger, structural problems of the health care system that have resulted in the world’s highest medical costs.