How Will States Keep Health Insurance Premiums Down If They Can't Order Insurers to Operate at a Loss?


Since Massachusetts overhauled its health insurance regulations in 2006, average premium prices have skyrocketed. And the governor's office seems to be at a loss as to how to stop further increases: Its response has not been to look for ways to make the system more efficient or less resource intensive, but to simply tell insurers that they aren't allowed to price their premiums as requested. Problem is, insurers can't operate that way for long, especially with all the new operating regulations and coverage mandates they're facing. And so it wasn't surprising to see that, following the state government's rejection of most proposed rate increases, the Bay State's four biggest insurers all announced hefty first-quarter operating losses.

Gov. Patrick's rate caps may not have been sustainable (insurers can only operate at a loss for so long), but they did provide an easy short-term method for blocking premium growth. And, more importantly, they gave the governor a political boost by making him look tough on insurers. But now it appears that his system of de facto insurance price controls may not be an option for much longer: Last week, the state's insurance appeals board sided with Harvard Pilgrim Health Care, one of Massachusetts' biggest insurers, and decided that the rate hikes the company had requested were, in fact, reasonable.

Naturally, the governor's office isn't too happy:

Consumer Affairs Undersecretary Barbara Anthony said the administration is reviewing the decision and weighing whether to ask Attorney General Martha Coakley to appeal the decision to the Superior Court.

"We strongly disagree with the hearing officers' decision," said Anthony. "They've substituted their judgment for the judgment of the commissioner."

Well, yes. But isn't that the whole point of an appeals board—to review the facts of a case and the ruling made and, if necessary, substitute the judgment of the appeals board for the judgment of the original authority? If the job of an appeals board was to defer to the judgment of the commissioner, then it wouldn't really be offering much of an opportunity for appeal, would it?

Regardless, it seems clear that the Patrick administration will continue in its fight for the right to demand that insurers operate at a loss. And I suspect that the Patrick administration will soon be joined by efforts at the federal level. Already we're seeing calls for national regulation and review of insurance premiums. As Gov. Patrick has discovered, these proposals are likely to score political points. But they aren't likely to address the core problems of rising medical costs and spending—problems which ObamaCare, like its model in Massachusetts, has only exacerbated.