Obama, Standing Athwart Health Insurance Rate Increases, Threatens to Yell "Stop!"


As the White House prepares to roll out health care reform version 1.1, President Obama is once again following the Bay State's lead on health care. Last week, Massachusetts Governor Deval Patrick announced that, in order to combat the state's rising and unsustainable health care costs, he would push for authority to review—and perhaps reject—health insurance premium hikes. Today, according to the New York Times, the president will propose giving the federal government "new power to block excessive rate increases by health insurance companies," on the apparent theory that if the president simply demands that prices don't go up, they won't.  

Given last week's brouhaha over health insurance rate increases in California, it's certainly timely. And given the widespread public frustration with insurers, it's probably politically savvy, too. It's also hard to oppose: Who could be against blocking excessive rate increases? After all, they are, by definition, excessive (or, depending on who's talking, unreasonable).

But the problem, of course, is that what constitutes excessive or unreasonable isn't easy to define. I was at a conference with a number of lawyers this weekend, and one of them joked about how great words like "reasonable" were for the profession. (How many lawyers does it take to define what "unreasonable" means? Well, how many do you have?)  The idea is to create some legal wiggle room, but you tend to end up with absurdly circular definitions like Arizona's, which defined excessive insurance rate hikes as those that "are likely to produce an underwriting profit that is unreasonably high." It's excessive if it's unreasonable! Unreasonable if it's excessive! Feel free to ride this definitional merry-go-round until you puke. 

Fun as that sounds, let's go ahead and answer some key cable-news questions in advance: Is Obama's proposed rate-review commission a death panel? Nope! But it could result in insurance companies denying coverage more than they would otherwise in order to meet premium requirements. Is it a government takeover of the country's health care system? Not exactly. But it gives the federal government a lot more authority over health insurers. So what is it then? If you guessed "a form of price controls," you're today's lucky winner. And, just like when Bill Clinton proposed them, medical price controls are a deeply problematic idea.

The other thing rate-reviews do is provide a way to shift blame for care cuts onto the mean old insurance industry: As Cato's Michael Cannon writes:

Artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: "Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly — i.e., to deny coverage for more services."  No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called "public option."

Meanwhile, the effect of words like "unreasonable" and "excessive" is to give regulators the power to step in when they feel like it and set rules as they see fit. In theory, looser definitions give them the freedom to be more, uh, reasonable with the application of rules, but in practice, looser rules tend to make regulators even more powerful by opening up even more opportunities to step in and force changes. Somehow, though, I don't suppose we'll be seeing legislation designed to prevent "unreasonable" bureaucratic power grabs any time soon.