Obama Administration Should Require Broad Financial Disclosures from Health Insurers To Scrutinize Unreasonable Rate Hikes

WASHINGTON, Aug. 13 /PRNewswire-USNewswire/ -- Consumer Watchdog called on the Obama Administration to adopt new regulations requiring broad financial disclosures by health insurance companies to help insulate Americans from double-digit rate increases. Insurers should provide details of shadowy multibillion-dollar transfers to out-of-state affiliates and parent companies when they are required to justify "unreasonable" rate increases under the health reform law, said the group.

The insurance companies that are flagged by regulators for unreasonable increases must also disclose lobbying expenditures, campaign contributions, advertising, marketing and certain administrative expenses, wrote Consumer Watchdog in a letter to state regulators who are writing recommendations to submit to HHS. Download the letter: http://www.consumerwatchdog.org/resources/ratejustification8-11-10.pdf

"The public and regulators need enough information to determine whether large money transfers to affiliated companies are legitimate payments for actual services or if insurers are playing a shell game with consumers' premium payments," said Carmen Balber, director of Consumer Watchdog's Washington DC office. "It's also important to every consumer facing unreasonable rate hikes to know how much of their premiums went towards political spending, like lobbying to weaken regulations."

If not itemized, bulk payments to out-of-state affiliates could be used to camouflage excessive administrative costs or profit, prohibited under new rules that require insurers to spend 80% to 85% of premiums on medical care. Such payments are listed in financial reports as payments for services, but there is no way to tell whether the payments are simply a way to keep money within the parent company without regard for value.

A Consumer Watchdog analysis of Blue Cross of California financial statements found that the company made $2.2 billion in affiliate company distributions on "management agreement and service contract transactions" in 2007 alone. It also transferred $4.8 billion in dividends to parent company WellPoint after its 2004 merger with Anthem, even as the company proposed rate increases in the individual market totaling 10 times the rate of medical inflation. Read the analysis: http://www.consumerwatchdog.org/patients/articles/?storyId=32952

The group also asked regulators to require insurers to illustrate the impact of a proposed rate increase that has been found unreasonable on sample policyholders, to provide a baseline for comparison.

"The whole purpose of a rate justification is to evaluate an increase that has been found unreasonable," said Balber. "The quality of these disclosures will ultimately determine whether rate review shines new light on questionable rate hikes, or is just another way for the health insurance industry to obscure data and mislead the public and regulators."

The National Association of Insurance Commissioners meets in Seattle this week, where regulators are writing recommendations for rules to implement key features of the health reform bill, including how much information health insurers must disclose about unreasonable rates.

Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org

SOURCE Consumer Watchdog