ObamaCare's Unreasonable Insurance Rate Review Regulations

What happens when individual states don't follow the federal government's orders under ObamaCare? The federal government takes over. Today, Obama's Health and Human Services department announced that the some part of the health insurance rate review programs in 10 states were not yet up to snuff—and federal officials could elbow past state authorities to conduct the rate reviews themselves. 

ObamaCare's rate review provisions require the Secretary of Health and Human Services to review insurance rates in order to determine which rate hikes might be "unreasonable." But how does the Secretary know which hikes are unreasonable? According to the Congressional Research Service, making that determination would require difficult, technically complex judgments: "The complexity of making such a determination generally requires analysis of multiple factors by actuaries and accountants. Such a review generally does not lend itself to the use of simplistic benchmarks such as merely prohibiting double-digit percentage rate increases." [Bold added.] So what did Sebelius and her team do? They declared that health insurers must go through a formal review process in order to justify each and every rate hike larger than 10 percent. 

That still leaves HHS with a definition puzzle. What exactly does "unreasonable" mean? But it's not a puzzle the administration's health wonks actually managed to solve. According to the agency's rate review regulation, a rate hike may be unreasonable if it is “discriminatory,” “unjustified,” or “excessive.” Those are all just as subjective and opaque as "unreasonable," and last two are particularly unhelpful. “Unjustified” sounds suspiciously like a synonym for “unreasonable”—as does “excessive.” Indeed, the whole exercise takes on an Escher-esque circularity when HHS actually defines “excessive” as “unreasonably high.” It's a regulatory funhouse hall of mirrors: Rate hikes are excessive if unreasonable, and unreasonable if excessive. 

Under ObamaCare, states must either commit to entering into that funhouse by implementing the rate review regulation up to HHS's standards (you can see the factors HHS used in determining which state-led review programs are effective here), or step aside and let the federal government take over. Today's announcement was a warning to 10 states that, without improvement, that's exactly what HHS is prepared to do. States, then, have little choice or flexibility in how they proceed: Either they follow the feeral government's rules, or they let the federal government move in. 

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • PR||

    9.9% rate hikes coming

  • Matt Felch||

    More like 9.99%.

  • Brandon||

    And apparently Obama and Sebelius have absolutely no problem with rates doubling every 7 years. Or they just haven't done the math behind the pretty, round numbers they throw out.

  • Fist of Etiquette||

    No Premium Left Behind.

  • Virginia||

    Alabama, Arizona, Idaho, Louisiana, Missouri, Montana and Wyoming. It will also handle small-group market reviews in Iowa, Pennsylvania and Virginia

    The next iteration will include the Dakotas, the Carolinas, and Georgia. I expect a collective fuck you from that group.

    Massachusetts, California, New York? I guess their insurance regulation "works" the way HHS wants.

  • Barack Hussein Obama||

    WE HERCULE TRIATHLON SAVINIEN, MYRA! Down with the [EMPIRE] Down with Antony! WE HERCULE TRIATHLON SAVINIEN, MYRA! Down with the [EMPIRE] Down with Antony!WE HERCULE TRIATHLON SAVINIEN, MYRA! Down with the [EMPIRE] Down with Antony!WE HERCULE TRIATHLON SAVINIEN, MYRA! Down with the [EMPIRE] Down with Antony!WE HERCULE TRIATHLON SAVINIEN, MYRA! Down with the [EMPIRE] Down with Antony!WE HERCULE TRIATHLON SAVINIEN, MYRA! Down with the [EMPIRE] Down with Antony

  • Max||

    WHAT'S WRONG WITH NATIONS?
    THAT'S A WEIRD WAY OF ASKING A SIMPLE QUESTION.
    STOP.
    NOW GO FORTH.
    BEGIN THE MARKET RESPONSE TO NATURE.
    STOP.
    NOW GO FORTH.
    WAIT.
    STOP.
    NO GO FORTH.
    THIS ISN'T THE BEGINNING.
    THIS ISN'T EVEN THE END.
    THIS ISN'T THE MIDDLE OR THE AREA IN THE CORNER.
    IT'S A MATTER OF SURVIVAL.
    ACID WASH.
    DATA, PICKING NOSE, PICKING LICE, PICKING SONGS.
    GO.
    NOW STOP.

  • Ludwig von Mises||

    "Begin the market response to nature."?

  • Friedrich Hayek||

    Don't look at me muthafucka. I don't know what the hell he is talking about.

  • don marquis||

    MEHITABEL HIT THE CAPS LOCK KEYYYY

  • ||

    I suspect HHS is about to get a refresher course in "arbitrary and capricious". Insurance companies can afford to fight this all the way to SCOTUS.

    And a regulatory finding that says rates are unreasonable because Kathleen Sebelius says so, is arbitrary and capricious.

  • PIRS||

    If the whole thing isn't struck down before hand.

  • ||

    No, R C.

    I am sure you are conversant with standards of review. It is now black letter law that decisions / rules made by administrative agencies are entitled to "deference". Courts must genuflect to the "expertise" of those charged with implementing the statutory schemes of the legislature. In addition, courts are to accord great weight to an agency's interpretation of its regulations.

    Of course, one should recognize that the administrative state is utterly incompatible with First Principles. The administrative state is also repugnant and antithetical to a free society.

  • Fred||

    Yes, except when they are ruled to be "arbitrary and capricious" as dictated by the APA. This still happens fairly regularly.

  • ||

    As a percentage of all challenges (in Massachusetts, they are called petitions for judicial review) to administrative agency decisions, what number are successful?

    Not a very high percentage.

  • ||

    Get back to me when the antitrust regulations are struck down as arbitrary and capricious.

  • CrackertyAssCracker||

    +ex post facto

  • AlmightyJB||

    Good article on regulation costs here:

    http://hotair.com/archives/201.....e-problem/

  • AlmightyJB||

    So when rate insreases WOULD be less than 9.9%. insurance compamies will go ahead and raise rates 9.9% anyways to provide themselves a cushion in years where rates increases might be higher so they don't have to go through a review. How much is that "cushion" going to cost us.

  • ||

    Wow, OK those folks are really brutal when you think about it. Wow.

    www.total-privacy.ua.tc

  • pantherlax||

    Rate reviews are the mechanism that will bring Single-payer. Doesn't matter if SCOTUS finds them arbitrary or not, the Dems will whip up the populist sentiment just like they did to ram the bill through and bring bus loads of purple shirts to DC with their pre-printed signs about evil insurance companies and the 'obscene' profits they make. Nothing like fear-mongering to make the people demand the government take away their freedom...

  • Commerce Clause||

    BOW, bitches.

  • populist sentiment||

    never reflected support for ObamaCare

  • ||

    unless they meant Team Blue populist sentiment.

  • ||

    a rate hike may be unreasonable if it is “discriminatory,”

    In other words, "based on risk".

  • KS||

    What does risk have to do with insurance?

  • ||

    I cannot wait for this fucking clown shoes administration to lose the next election. Of course, then I will have to start waiting for whoever beat them to lose, but at least these scumfucks will be gone.

  • the real oo||

    except that obama's gonna get re-elected.

  • Mr. FIFY||

    You say that as if it's a good thing.

  • AlmightyJB||

    I don't know. I used to say the same thing, because of demographics, but these clowns seem to be doing everything possible to prevent an economic recovery. Unemployment rate is over 7% next fall, I think he's gone. If it's under 6% it will still be close.

  • Sudden||

    I think it largely depends on who the 'pubs throw against him. The indies will vote for the kindly black man if the alternative is Romney. I seriously think that Ron Paul would actually be the strongest 'pub in a general election, even factoring in age. He has a cross-partisan appeal that I can't even comprehend. He is the single most radical republican in the field, and yet I know TEAM BLUE lifers who say they respect the guy and may vote for him.

  • Invisible Finger||

    The bigger point of the next election is how many Dems don't bother to show up because they don't like their candidate. OF course, if the GOP runs an even emptier suit (like romney) then GOPers will stay home too.

    I expect voter turnout so low that it basically is a no-confidence vote in the system as a whole.

  • some guy||

    So let's start a campaign to have people write in "No confidence". What happens if a write-in vote for "No confidence" wins? Does the first person to change his name to "No Confidence" become president?

  • Michael||

    One thing that our first black president has unquestionably succeeded at is making it very difficult for whatever poor sap might someday want to be the second.

  • ||

    Non-objective laws that vary according to the whims du jour of Top Men.

    This is a system that cannot possibly be open to massive incentivization for abuse and graft by the angels in the form of kings in government.

  • Top. Men.||

    You got a problem with that?

  • Achtung Coma Baby||

    Just remember, the Obama administration is made up of better human beings than the insurance companies, so they will ALWAYS make the right decision.

  • Untermensch||

    Either they follow the feeral government's rules…

    Remove an extra e and this typo would be spot on.

  • Night Elf Mohawk||

    Rate hikes are excessive if unreasonable, and unreasonable if excessive.

    That's some catch, that Catch-22.

    They declared that health insurers must go through a formal review process in order to justify each and every rate hike larger than 10 percent.

    $100 says the review process would kick in at 12% if we had six fingers on each hand.

  • Achtung Coma Baby||

    Well let me ask you this- when they were making this shit up, why did they pick 10? Why not 9 or 11? I’ll tell you why- because 10 sound official. Ten sounds important! Ten is the basis for the decimal system, it’s a decade, it’s a psychologically satisfying number (the top ten, the ten most wanted, the ten best dressed). So having ten commandments was really a marketing decision!

    - George Carlin

  • the real oo||

    Moses: “The Lord, the Lord Jehovah has given unto you these fifteen...
    [drops one of the tablets]
    Moses: “Oy! Ten! Ten commandments for all to obey!
    -mel brooks, history of the world pt 1

  • prolefeed||

    But how does the Secretary know which hikes are unreasonable? According to the Congressional Research Service, making that determination would require difficult, technically complex judgments

    Well, no. If your groups drop coverage and move elsewhere, your rates are unreasonable.

    But that standard would make the fed's involvement unnecessary.

  • ||

    "It's a regulatory funhouse hall of mirrors"

    Aren't they all?

  • Republicans||

    Thanks to the law of unintended consequences, we'll be deciding what exactly is 'unreasonable'.

    We might not mind insurance companies raising rates through the roof just to show how awful the effect of Obamacare is.

  • SEIU voting machine techs||

    Not if we have our way in 2012!

  • CrackertyAssCracker||

    Either they follow the feeral government's rules, or they let the federal government move in.

    Or they fucking fire up their national guard, and say "come and take it ... or them, you know our local insurance beuracrats".

    And you mis-spelled feral. There is only one 'e'.

  • Sudden||

    Indeed, the whole exercise takes on an Escher-esque circularity when HHS actually defines “excessive” as “unreasonably high.”

    I like the metaphor Suderman.

  • GSL||

    California just took a step closer to enabling its own health insurance rate regulation.

    Here's my question: with states negotiating with plans as part of those Health Insurance Exchanges, what happens when a state negotiates a rate that appears to be excessive? Can the government really rule that it negotiated an improper rate, and if not, how can it be legal to effectively exempt one part of the market from regulation?

  • ||

    How does the HHS "take over" in this case? Or is this where those HHS SWAT teams come in?

  • cynical||

    10? That's still a couple of states shy of a new Confederacy.

  • ||

    :: I paid $32.67 for a XBOX 360 and my mom got a 17 inch Toshibalaptop for $94.83 being delivered to our house tomorrow by fedex. I will never again pay expensive retail prices at stores.I even sold a 46 inch HDTV to my boss for $650 and it only cost me $52.78 to get. Here is the website we using to get all this stuff, BuzzSave.com

  • Cool, edsa||

    Hey, I got a iphone for 29 cents and a 65-inch plasma tv for $19.98 with free shipping and a sony vaio for less than $10 dollars. Shipped free by rail.

  • Grinning Doctor Obama||

    I don't need to consult the constitution about my right to use government force to make the government everyone's doctor. This is a national emergency.

  • J Nail||

    Once again you present a stilted view of this subject.

    All that HHS can do is require that rate increas requests be posted on a website in a common form that is easy to review.

    It is called "sunshine" and 10 states have NO rate review mechanisms at all giving insurers free reign in 20% of the nation to do as they please.

    Ans yes they could disallow an insurer from participating in the exchanges if they desire to for egregious behavior.

    I suspect we would all be able to see a pattern of poor behavior by an insurer.Most thinking beings would be able to discern this pattern just like they know pornography when they see it.

  • Nike Dunk Shoes||

    thanks

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement