Health Insurance Reform May Be Far From Over

After a year of debate and lobbying and speculation, the passage of the Patient Protection and Affordable Care Act last month seemed like a definitive period at the end of long and rambling sentence. But for the health insurance industry, it might have just been a comma, bringing only a brief pause in the pursuit of industry reforms, rather than its end.

Last week the Senate heard testimony for a new bill introduced by Sen. Dianne Feinstein (D-CA) that would give the Secretary of Health and Human Services the authority to approve or deny rate increases proposed by health insurance companies.

This regulation is typically handled by the states, but nearly half don't require premium reviews, and Feinstein's bill would establish a seven-member advisory board—with at least one medical professional, one health insurer representative, and two consumer advocates—to establish a nationwide "backstop" for premium increases. States could still impose additional regulations of their own on top of the federal minimum.

Feinstein's proposal was briefly included in the original healthcare reform legislation, but was taken out because it didn't meet the requirements for inclusion in the reconciliation process. As is, the law requires insurers to submit premium increases to the feds and publicly disclose reasons for the hikes, but stops short of giving the government authority to reject a rate. Feinstein's bill changes that.

If HHS deems an increase unacceptable, the legislation gives the department authority to deny or modify the rate increase, order rebates to consumers, or take "any other actions that correct the unreasonable increase."

Naturally, health insurers think they've been regulated enough already. Karen Ignagni, president and CEO of America's Health Insurance Plans (AHIP), told the Senate Health, Education, Labor and Pensions (HELP) committee that the industry already has enough requirements to meet in the existing reform law, and argued that premiums have little affect on overall healthcare costs.

But in some ways, insurers gave legislators the ammunition for this attack—or to be specific, Anthem Blue Cross of California, which earlier this year requested a 39% rate increase, may have single-handedly turned the tables on healthcare reform's fate. Feinstein cited similar increases—up to 56% in Michigan, 24% in Connecticut, and 23% in Maine—in support of her bill.

The natural instinct of any industry facing a new regulatory environment is to adapt as much as possible before the changes take effect. We saw many credit card companies changing certain policies while they still could before new consumer protections kicked in this year, for instance.

But health insurers have to tread very carefully with reform still on the Congressional agenda. Every instance of bad press about rate increases, targeted rescissions, and other controversial practice gives Congress new talking points for expanding the scope of reform.

It doesn't stop with rate regulation, either. There is still a stand-alone public option bill floating around, and specifics about how to enforce the new bans on rescissions and denials for pre-existing conditions have yet to be determined.

Politically, these changes may be difficult to pass as mid-term elections approach and Democrats struggle to win even a single Republican vote for their proposals.

Then again, that's exactly what everyone thought in February before Anthem proposed a 39% rate hike.