Consumer Watchdog calls for national freeze on health insurance rates and rate regulation

Insurers Would Get Tens of Millions of New Customers Under Reform, and Owe Americans a Break From Audacious Rate Spikes by Anthem Blue Cross and Others

Consumer Watchdog called on President Obama to impose a national freeze on health insurance rates before health reform takes effect to protect consumers from premium hikes like the 39% increase recently announced by Anthem Blue Cross in California. The rate freeze is one of five tools Consumer Watchdog urged the president to include as part of his proposed fixes to the Senate health care bill.

"Insurance companies that have spiked their rates in advance of the passage of health reform must offer families a breather on rates in return for gaining tens of millions of new customers. Given the audacity of health insurance rate increases last year and this year, and with the economy in deep recession, only federal legislation can curb the spiral of unaffordability. A rate freeze is critical to hold prices in check until new consumer protections have time to take effect," said Carmen Balber, Washington Director for Consumer Watchdog.

The group outlined five must-have consumer fixes that will allow the Department of Health and Human Services ("HHS") and the states to protect consumers from insurer abuses including unjustified rate hikes that the President should include in the reconciliation bill to follow House passage of the Senate health care legislation.

1. Freeze health insurance rate increases. Freeze health insurance rates—including premiums, deductibles and copays—at current levels until a state or HHS institutes robust health insurance rate regulation. (See No. 2)

2. Require effective rate regulation. Expand on the modest rate regulation requirements of the Senate bill to:

* Require prior approval of rate changes by state regulators

* Guarantee the public's right to intervene to further reduce rates

* Increase federal grants to states for development of "prior approval" regulations

* Publish strong federal fallback regulations to take effect in states that do not adopt effective prior approval regulation

* Require consumer premium refunds if rates that have already gone into effect are later found to be excessive

California's landmark prior approval rate regulation for auto insurance, Proposition 103, has saved drivers in California $62 billion since 1988, and is a model for health insurance reform. Read more in a 2008 Consumer Federation of America report at: http://www.consumerfed.org/elements/www.consumerfed.org/file/finance/state_auto_insurance_report.pdf

3. Broaden states' rights to expand coverage. With multiple compromises that eliminated key pieces of reform, states must have the ability to expand upon national reform to provide better coverage for their citizens by 2014. Under the Senate bill states may apply to use federal Medicaid, tax subsidies and other funds for alternate, state-based health reform. The follow-up bill should add an explicit right for states to establish universal coverage similar to Medicare for all residents, and make automatic any federal waivers necessary for states to take control of their health care systems, including Medicare and ERISA waivers.

4. Bar "nationwide plans" from escaping state rules. As the recent Blue Cross premium-hike scandal has shown, insurers will attempt to push customers into low-benefit policies with high out of pocket costs by ratcheting up the price of comprehensive coverage. The so-called "nationwide plans" in the Senate bill will further enable this deplorable tactic if, as the bill is currently drafted, they may bypass state consumer protections. This exemption from state laws, which will encourage a race to the bare-bones bottom of insurance coverage and allow insurers to cherry-pick younger, healthier customers, should be eliminated.

5. Provide legal accountability. Patients who have health coverage paid for in part or full by employers are currently unable to hold insurers legally accountable for denying medically necessary treatments. 132 million Americans with private employer-paid health coverage cannot recover damages against an insurer even if the company's failure to approve treatment kills a loved one. The loophole was created by a 1987 Supreme Court decision in the case of Pilot Life v. Dedeaux. If government requires the purchase of health insurance policies, it must guarantee access to justice when insurers wrongfully deny treatment to patients. For more information, go to: http://www.consumerwatchdog.org/patients/EqualJusticeForPatients/