Health Insurance Regulators Struggle To Define What Makes a Rate Hike "Unreasonable"

Thanks to the Affordable Care Act's provision requiring governmental review of health insurance premium hikes, state health insurance regulators are currently in the process of trying to pin down just what it is that makes an insurance premium hike "unreasonable." Turns out no one really knows for sure—and, in fact, no increase at all might qualify: According to a staffer with the Minnesota Department of Commerce, "even a zero increase might be unreasonable, if an insurer was at the same time cutting benefits offered in the policy." [Bold added.]

Technically, the federal government doesn't yet have the authority to reject rates, but a proposal from Sen. Dianne Fienstein to regulate health insurance like a public utility makes it clear that's where this effort is leading. How'd that work out in Massachusetts, where Governor Deval Patrick recently rejected about 90 percent of this year's proposed rate hikes? Not so well:

The state's four biggest health insurers today posted first-quarter losses totaling more than $150 million, with three of the carriers blaming the bulk of their deficit on the Patrick administration's decision to cap rate increases for individuals and small businesses.

Without a close scouring of the insurance company books, it's impossible to say for certain whether the losses are actually due to the rate caps, as the insurers claim. But this provides at least a strong suggestion that the Bay State's rate review and rejection program isn't going so well: It's tough to implement health reform that works through the private system if the reforms put the private system out of business.