Health Insurance and Federal Oversight

Ahead of a bipartisan healthcare summit this Thursday, President Obama today will announce a revised plan for healthcare reform, including a proposal giving the federal government new power to block so-called “excessive† rate increases by health insurance companies. According to Administration officials, the legislation attempts to bridge the differences between the health bills passed by the House and the Senate last year. The focus on expanding federal regulation into the domain of insurance rates comes after health insurer Anthem Blue Cross of California recently announced premium increases of up to 39 percent. Health and human services secretary Kathleen Sebelius last Thursday issued a report sharply critical of the double-digit increases sought by insurers. However, a February 18 New York Times article by Reed Abelson reports that analysts and health economists say the challenging business environment may leave health insurers little choice but to raise prices if they want to protect profits. The article reports:

“The weak economy and the unrelenting rise in the cost of medical care make it increasingly difficult for companies to avoid substantial rate increases – even if those increases provide fresh fodder for Democrats seeking to pass the now-stalled health care legislation in Congress.†

It goes on to discuss a number of topics relevant to the current debate on health insurance reform such as adverse selection (where only those most at risk buy coverage) and mandatory coverage. Meanwhile, over at Managed Care Matters blog Joe Paduda has a timely post on why the focus on health insurer rate increases may be nothing more than a red herring. Check out I.I.I. info on health insurance for tips on how to pick a plan and how to lower health insurance costs.

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