Policy

ObamaCare's Unreasonable Insurance Rate Review Regulations

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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. 

We'll be the judge of what "unreasonable" means.

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.