ObamaCare: A Victory For Regulatory Whimsy


The health insurance rate-review regulation included in last year's health care overhaul goes into effect this week. Accounts in The Wall Street Journal and The Washington Post suggest that it's a weak regulation, because regulators can't actually reject rate hikes. Here's The Post:

There is, however, one thing regulators cannot do: reject the "unreasonable" rate increases. They can make all the public fanfare they want around big rate increases but, at the end of the day, they cannot stop premium increases from going through.

And The Journal:

There's a big catch. Even if regulators find the rate increase is unjustified, the law gives them no new powers to block the insurer from charging it. Instead, federal regulators say they are hoping that disclosure of large increases—which will be posted on the Department of Health and Human Services' website—will be enough to discourage carriers.

It's true that regulators can't simply deny rate hikes they deem unreasonable. But as the Congressional Research Service explained in a report last year, they do have another avenue of attack: pushing insurers out of the new health insurance exchanges—the state-based, government-run health insurance marketplaces created by ObamaCare.

According to CRS, states will "make recommendations to the exchange in their state about whether a health insurance issuer should be excluded from participation in the exchange based on a pattern or practice of excessive or unjustified premium increases." Given the expected dominance of the new insurance exchanges in the individual insurance marketplace, this is a pretty serious threat, and it potentially gives regulators significant leverage against insurers.

So how will it be determined if insurers are engaged in a "pattern or practice" of "excessive or unjustified" increases? However the authorities want. As CRS notes, "the terms 'pattern' and 'practice' are not defined by law."

If those recommendations are anything like previous state-based efforts to regulate health insurance, they'll probably be inconsistent and inscrutable. The CRS report points to Regence Blue Cross Blue Shield, an insurer in the state of Oregon that asked for a 26 percent rate hike for 2010. State regulators denied the 26 percent hike. Were prices falling, and profit margins on the upswing? Was the company selfishly raking big bucks for itself while saddling consumers with giant rate hikes? Not at all. Quite the opposite, in fact. Medical spending has risen 12 percent the previous year, and the company had taken a 9.7 percent loss of more than $15 million. 

Now, state officials didn't say that Regence couldn't raise rates at all. They approved a 17 percent hike, arguing that the smaller hike would be enough because they had approved a full 26 percent hike the previous year. So what, I suppose, if the company had still taken an eight figure loss? And if the losses persist, and Regence goes out of business, or stops offering many of its plans? The beginning of the CRS report notes that "premiums must be adequate to pay for expected health care use, they also must be sufficient to compensate insurance carriers for taking on the financial risk associated with providing coverage." Forcing insurers to operate at a loss, subject to regulators' whims, does not seem particularly sufficient for either. 

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  1. 2014’s drawing near, and it makes me sick to my stomach that we’re so deep in the shit. What recourse will remain if ObamaCare isn’t repealed by the next Congress?

  2. “Forcing insurers to operate… subject to regulators’ whims..”

    That’s a feature right ? No more rule of law.

  3. Always the same…they will do everything they can to prevent companies from being profitable, then take over when they fail, claiming it is now an essential public service. Then they’ll jack the rates, but hide the cost deep in the budget.

  4. “and it potentially gives regulators significant leverage against insurers.”

    And it gives regulators a big, fat payday, since thy get to decide which (wealthy) insurers get to play.

  5. To operate a car wash, you need a car wash, and if you go out of business all you have is an old car wash. To operate an insurance company, you need massive amounts of capital. Insurance companies don’t need to be insurance companies to make money with their capital. If insurance companies become over-regulated, they will leave the business and only the consumer will suffer.

  6. Mark Steyn put his finger directly on it: “Tyranny is always whimsical. You may be lucky. You may not catch their eye ? for a while.”

  7. We are already over-regulated. Why do you think unemployment is so high? While I dislike ObamaCare and everything it stands for, I would point out the the Federal Government is already “forcing (regulating) us to buy something we don’t want or need.” That is fluorescent lighting


    Congress and the White House should stop squandering the people’s money. There are many ways to “cut as discussed herein” and use savings to improve quality of basic invested entitlements. Congress should transition to an improved medical system. Vote opponents to this “out”. Citizens come first.
    It is time the U.S. reduces human rites and police activities for the World by lobbying the United Nations, NATO and Interpol to “take on more”. 800 bases in 63 countries across the world should be reduced. Examples are fewer forces in, Bosnia, Germany, Philippines and Okinawa.
    Starting with Iraq, only train for self reliance. In Afghanistan train and diminish corruption by requiring accounting practices for aid, substituting minerals mining and food crops for drugs. $34 billion lost in service contracts. Its time for oil producers to pay for military supplies and consulting.
    Cut bloated federal bureaucracy and expenses. Combine CDC, EPA and FDA. Combine the FAA, NHTSA and DOT. Combine GAO and CBO. Eliminate “must spend all”. Return “unused” yearly budget to the treasury. Cut budgets (other than entitlements) on an average of 10%. Implement GAO’s report to Congress on eliminating duplication, overlap and fragmentation in 81 of the federal government’s departmets, agencies, programs, offices and initiatives.
    Eliminate all 32 czars Mr. President. Reduce your 469 member staff which makes nearly 39 million per year! Halt first lady $180,000 air force one vacation trips. Stop “multi million dollars per day” presidential-family foreign trips.
    Contribute to only one of: The World Bank or International Monetary Fund or U.S. Agency for International Development.
    Reduce foreign aid bribery. For example, no aid to oil rich -Iraq. Halt $150 million aid to Palestinians. Slash $1.3 billion annually to Egypt and Pakistan!
    Charge bailed companies (TARP) for their huge executive bonuses at taxpayer expense. Government should sell shares to recoup for taxpayer. Billions still owed?
    Congress should reduce “stimulus” expenditures by halting over budget and vote bribery “earmarks”. Example: Stop “cow burp” and “drug smoking monkey” studies. Take back $13 billion unspent in states. Eliminate subsidies or tax credits that smell “earmark”. Congress should not pay student loans for their staff or family from their operating budgets. Please- no renting of private or military aircraft. An example was Pelosi’s family of $2.1 million for over 2 years. Congress should set commercial travel cost standards and controls.
    Reduce medical cost by: allowing purchasing in any state, “tort reform”, and reducing “red tape”. Reduce Medicare fraud by expediting billing cost speed, and doctor/patient screening of state controlled local provider groups.
    Congress should enforce existing immigration laws and implement “no illegal birthrights”. Entitlements or benefits should be for only citizens. Deport criminal “illegals”. Only deportees and workers on Visa/Guest Programs qualify for needed medical benefits. Complete an improved fence. 56% of this border is uncontrolled.
    Corporations and retirees should receive tax reductions for healthcare plans.
    These actions will improve funding for:” Medicare”, “Medicaid, and “Veteran’s Affairs”.
    Healthcare quality can be at least that for Congress or the Federal Employee Health Benefits Program (FEHBP). Additional benefits are: dental coverage, improved visual coverage, no drug “donut hole”, no pre-existing conditions, no deductibles and co-pays except for extended skilled level nursing.
    Other benefits are aid for unemployment compensation and Social Security with reinstated cost of living increases.

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