Health Care Spending Rules Survive Insurer Onslaught, Head to HHS; Watchdogs Call For Rate Freeze by President Until Pricing Rules Take Effect

WASHINGTON, Oct. 21 /PRNewswire-USNewswire/ -- State insurance commissioners sent rules to the Department of Health and Human Services today that will require insurers to spend more money on health care and less on administration and profits.

Regulators should be applauded for rejecting last-minute efforts to gut the regulation, said Consumer Watchdog, but warned that they have already given the insurance industry plenty of opportunity to manipulate the rules.

To aid consumers currently facing double-digit health insurance premium increases, Consumer Watchdog's leaders reiterated their call for President Obama to place a moratorium on premium increases, articulated this week in a Los Angeles Times oped. Read the Los Angeles Times oped: http://www.consumerwatchdog.org/patients/articles/?storyId=36580

 "Making these rules work will require tough scrutiny of insurance companies' spending to make sure they don't use loopholes in the law to pass off overhead costs as health care," said Carmen Balber, Washington DC director for Consumer Watchdog. "However, the law still does nothing to cap rates and consumers are struggling to pay double-digit premium increases now.  President Obama should forbid premium hikes until insurance companies comply with pricing provisions of the new federal law and explain increases before they take effect."

The health reform law requires insurance companies to publicly justify unreasonable premiums before they take effect and publicly disclose information about spending on health care, administration and profits. However nothing in the law gives any government agency the power to stop an unreasonable premium increase. That's the kind of reform that's really needed to hold down premiums, said Consumer Watchdog.

"After the rate freeze, the White House should then fight for real rate regulation that gives all state governments the power to reject unreasonable rates," argue Balber and Consumer Watchdog President Jamie Court, author of  "The Progressive's Guide To Raising Hell," in a Los Angeles Times oped this week.

Three amendments were rejected by state regulators today that would have gutted the requirement that insurers spend at least 80-85% of consumers' premiums on health care. However, the rules still contain significant concessions made to insurers before this morning's vote that will reduce the impact of medical spending requirements.

The regulation forwarded to HHS:

• Allows insurers to subtract most federal taxes from premium revenue before calculating medical spending.
• Allows insurers to classify many administrative activities as health quality improvements including some:
• bureaucrats whose job it is to reject claims,
• phone hotlines,
• accreditation fees,
• marketing in the guise of health education.
• Allows insurers to use penalties they pay for failing to spend enough on health care in some years to reduce their health care spending requirement in the future.

Each of these concessions makes it easier for health insurers to meet the new rules without actually improving the amount of premium they spend on medical care.

SOURCE Consumer Watchdog