Monday, November 29, 2010

Kreidler proposes health insurance rate reforms

News release issued by Washington State Insurance Commissioner today:

Insurance Commissioner Mike Kreidler is asking state lawmakers to preserve his authority to scrutinize health insurance rates, boost transparency, and to let him—for the first time—consider some insurers’ surpluses when reviewing rates.

“Some non-profit insurers have built up hundreds of millions of dollars in surpluses in recent years, while still seeking double-digit rate hikes,” said Kreidler. “I want the law changed so we can take a closer look at that, while still maintaining a vital insurance market.”

Under current law, surpluses—including investment income—cannot be taken into account when considering a company’s rate request.

Kreidler also will seek more transparency, so consumers can have a full picture on rate proposals by insurers. Today, most information included in a rate filing is not releasable to the public.

“Tens of thousands of Washingtonians who have to buy insurance on their own struggle to find and keep coverage,” said Kreidler. “We can help protect them by continuing to review rate hikes carefully. They also deserve to see how much of their insurance premium is spent on direct medical care versus administrative overhead and profit.”

Rate review: Kreidler gained the authority to review rates in the individual market in 2008, but it’s scheduled to expire after 2011. He’s proposing legislation to do away with that deadline.

Surpluses: The surplus proposal would only apply to non-profit health insurers, which account for most of the health insurance market in Washington. Also:

• Once a company amasses a surplus equal to 3 months of claims expenses, rate hikes would not be approved.

• The insurance commissioner could grant exceptions, however, if limiting the surplus or rates would pose a threat to the financial health of an insurer.

Transparency: The legislation would allow the public to see:

• What percentage of a specific rate request goes to profit, medical costs and administrative costs.

• How much, overall, a health carrier collected in premiums, how much money it made, and how much it paid out in direct medical claims.

• The medical trends the health carrier is using to project future rates.

“It’s simple: We need oversight of the health insurance industry,” said Kreidler. “And families deserve to see where their money’s going and how their rates are set.”