AGs may be left to fight rising health care costs

By John O'Brien | Sep 22, 2010




WASHINGTON (Legal Newsline) - Six months after federal health care reform was signed into law, some state attorneys general find themselves fighting rate increase requests by insurers.

Both Richard Blumenthal of Connecticut and Mike Cox of Michigan announced this week they are getting involved in rate increase requests made by Blue Cross Blue Shield. Reports also have the company changing plans in California, Colorado and North Carolina.

Aetna, too, is changing its business practices. It and Blue Cross Blue Shield will stop selling child-only policies instead of complying with a provision of the reform package that bars them from rejecting children with preexisting conditions.

"It's just accounting physics: Somebody has to pay," said Michael Munger, the chair of the political science department at Duke University.

"Since the law says that insurance companies have to write new insurance below cost, all of us who have continuous coverage have to pay more than our own cost. Thousands of small businesses will be forced to stop offering insurance.

"The net effect is that insurance costs will skyrocket, and the number of uninsured may actually go up."

Munger also has a PhD in economics, worked as a staff economist at the Federal Trade Commission and ran for governor of North Carolina as a Libertarian in 2008.

Department of Health and Human Services Secretary Kathleen Sebelius recently said insurers often inflate the rate increase needed, and that review of those requests will be the responsibilities of the states.

Cox and Blumenthal have traditionally taken a public stance against rate hikes they think are unwarranted.

"The law assumes that states will regulate rates, that that's the best marketplace. This is really a state-based bill... only if they abdicate that responsibility or say that they don't want to participate do we have kind of the back-up responsibility," Sebelius said at a National Journal event on Monday.

In the case of Blumenthal, who is juggling his AG duties with a campaign for U.S. Senate, all five major health insurance providers in his state have requested rate increases. He asked Insurance Commissioner Thomas Sullivan to reconsider premium increases for customers of Anthem Blue Cross Blue Shield on Tuesday.

He says those rate applications "have significant public and policyholder interests" and is asking for more transparency in the process.

"Holding the line on excessive insurance premiums is now more important than ever to our economy and public health," he wrote in a letter obtained by the Hartford Courant.

Blumenthal is also asking Anthem Blue Cross Blue Shield to allow Bristol Hospital on its provider network. He said he won't interfere in negotiations between the two sides but offered his assistance.

"The proposed termination -- affecting a substantial portion of the hospital's commercial insurance revenues -- could permanently undermine its financial stability," Blumenthal said.

Anthem is planning to terminate Bristol's provider status next month.

Meanwhile, Cox has filed a motion to intervene in proceedings surrounding Blue Cross Blue Shield of Michigan's recent rate increase proposal. The Republican AG has a long history of fighting the company.

On May 21, BCBSM requested a rate increase for Nongroup and Group Conversion subscribers of between 9.9 percent and 15 percent, depending on a person's health plan.

Group Conversion plans cover those who had employer-sponsored care but lost it, while Nongroup plans are those that cover individuals.

Cox says BCBSM has a growing surplus and shouldn't be asking for the increase. Last year, the company asked for a 56 percent increase for Nongroup participants and a 42 percent increase for Group Conversion subscribers, but it was reduced to 22 percent.

Cox unsuccessfully ran for governor this year and has also filed a lawsuit against the state's Office of Financial and Insurance Regulation.

He says rates for seniors who purchased Medicap have been illegally increased because the OFIR did not provide notice of the price hike.

BCBSM filed a new Medigap rate plan with OFIR on Aug. 6 to raise rates on subscribers who receive any subsidy from their former employers to purchase Medigap insurance and on out-of-state subscribers by $70.84 per month, a 66 percent increase.

BCBSM has also proposed raising rates on other Medigap subscribers by 12.5 percent, which would affect nearly 8,600 subscribers, Cox says.

OFIR issued a letter approving the rate increases on Sept. 7, but never published notice of the proposed rate increase within scheduled time frames, which Cox alleges is a violation of state law. His office, Cox contends, should be afforded 60 days after notice by OFIR to request such a hearing, and OFIR may not issue a final order until such a hearing.

Cox is one in a group of state attorneys general challenging health care reform in a federal court in Florida. Oral arguments were recently heard on the federal government's motion to dismiss.

Plenty of other attorneys general will surely get involved in future rate hike requests. Celtic Insurance Co., of Wisconsin and North Carolina, says costs associated with the reform package led to half of its 18 percent rate increase request.

Elsewhere, Aetna is increasing its rates in California by 7.4 percent and in Nevada by 6.8 percent.

Munger, who is a critic of President Barack Obama's economic policies and once said he is displaying an "anti-capitalist bias," said increasing insurance costs and unemployment will go hand-in-hand.

"If a company does offer health insurance to workers, and the cost increases, the price of new workers is raised dramatically," Munger said.

"So, if you wanted to know what is one of the biggest causes of stubbornly high unemployment, the answer is: Obamacare. Businesses can't afford health care, and so they can't afford to hire new workers.

"The reason unemployment is high is not a lack of investment. It's the new health care law."

And that gives state attorneys general a chance to enter another arena. In fact, Blumenthal already has -- he announced Monday he is challenging 151 layoffs at AT&T.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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