Will Heath Insurance Rates Rise Ahead of Reform?

Posted in Health Insurance

March 10th, 2010

The nations often tumultuous debate over health care reform may be coming to a close. A bill has been passed in the Senate, and news reports indicate that it may have sufficient votes to pass in the House of Representatives.

While Americans greet this news with mixed emotions, many people are wondering whether insurance providers will hike their health insurance rates before any reform becomes law. One health insurance provider, Anthem Blue Cross Blue Shield of California, recently raised their rates on individual policies by a staggering 39 percent.

Rate Hikes

The health insurance rate hikes may have actually jump-started stalled health care reform legislation to the chagrin of insurers. President Barack Obama and other champions of health care reform immediately pointed to the rate hikes as being indicative of what will happen without reform.

Health insurance rate hikes have also been announced in other states. Maine, Kansas and Oregon have all seen providers raise rates or seek to raise them, triggering significant backlashes from consumers and consumer advocates — not to mention lawsuits.

Should Insurers Be Allowed to Raise Rates?

Health insurance companies claim that they need to raise rates on individual policies because the economy is weak and many people are abandoning their coverage because they can’t afford it. According to the insurers, this means there are fewer people to help share medical costs.

Skeptics are not convinced, however, and think that health insurance providers are raising their rates for increased profits, and will continue to do so for as long as they can. With no laws or regulations to keep health insurance providers in check, critics argue, what’s to stop them from raising rates whenever they want?

The answer to that question depends on the state. Health insurance providers are (somewhat) regulated and monitored by state insurance boards because each state has different laws concerning health insurance. However, when it comes to setting rates, many state health insurance boards — such as California — can only review proposed rate hikes. They ultimately lack the ability to stop them if they disagree with their justification.

Regulating health insurance like regulating credit cards and the banking industry is meant to keep rates and costs down. As such, all attempts at reform and regulation are meant with fierce resistance from the industry that’s threatened with it. Needless to say, the health insurance industry has very deep pockets and billions of dollars to spend on lobbying Congress every year.

As a result, most attempts at regulation never go anywhere. Every once in a while, however, reforms are made and an industry that’s threatened with a restricted or lessened profit margin can seek to mitigate losses while they still can. As health care reform makes its hesitant way towards law, it remains to be seen what other cost-saving and profit-increasing measures the health insurance industry takes.