The White House is urging states to be more aggressive against health insurance companies as it looks to prevent expected and widespread premium hikes of 10 percent or more this year.
The federal health department announced Wednesday that it will dole out about $22 million to boost state-level "rate reviews," considered one of the strongest weapons against premium increases.
The administration’s latest push to control healthcare premiums comes just as proposed double-digit rate hikes make headlines nationwide.
Premiums for the most popular ObamaCare plans are expected to rise by an average of 11 percent next year, according to research by the Kaiser Family Foundation released Wednesday.
The new federal grants, described as a way to “hold insurance companies accountable for unjustified hikes” are likely to inflame an already tense relationship with health insurers.
Healthcare marketplaces under ObamaCare have had a tumultuous year. Many companies are already dealing with far less than expected in government help because of the shortfall to the ObamaCare risk-sharing funding pool. Several companies are now taking legal action to reclaim the funds.
Losses have been so severe for some companies that one of the nation’s largest insurers, United HealthCare, announced it would be pulling out of the exchanges altogether in 2017.
Insurers have been increasingly vocal about concerns that the Obama administration is not doing enough to steady the marketplace.
ObamaCare executives are under intense pressure to keep premium hikes in check this year. Most customers will get the first notice of their new premium costs in November, just before Election Day.
In the last week, federal health officials have already announced a plan to help stabilize the risk-sharing pool and hosted a conference in Washington, D.C., to help share "success stories" for companies that are staying afloat under the law.
Rate review, which was broadened under ObamaCare, is seen as an important tool for states battling to keep premiums low.
The expansion of that program, particularly on the federal level, has been strongly opposed by a major trade group for insurers, America’s Health Insurance Plans (AHIP).
AHIP spokesman Clare Krusing said Wednesday she hadn't reviewed full details of the administration's plan but strongly warned against turning the program into "a political football."
"We believe the current rate review process is sufficient. It needs to focus on the underlying cost-drivers of premiums."
For states like Texas that don’t have their own rate review process, the federal government can step in and work with insurers.
Other states, like Alabama, have set out to create their own rate review programs. Alabama’s Republican-led health department announced this year it would launch its own system to scrutinize rates.
Under the healthcare law, insurers are required to make formal arguments for any increase above 10 percent, though the federal government has no power to ultimately reject those rates.
Still, many health experts say rate reviews may not be effective in 2017 because many insurance companies have proof this year that the marketplace is hurting their bottom line.
“There are serious issues in the exchange right now that are not addressable by rate review,” Dan Mendelson, founder and CEO of Avalere Health, said in a recent interview.
Mendelson said state health insurance departments are most concerned about keeping insurance companies afloat and may have no choice but to approve double-digit increases this year.
“In a world where we are experiencing adverse selection, rate review is not going to be that effective in bringing costs down,” Mendelson said.
All but a handful of states have some form of rate review, though not all have the power to force companies to lower their proposed rates.
Some, like Connecticut and Maryland, have been strong regulators of premiums.
Jim Wadleigh, who leads the Connecticut marketplace Access Health CT, hired an outside actuary named Wakely Consulting last year to compile more precise data about an insurance market to help prove companies like Aetna don't need to raise premiums as much as they thought.
But this year, he said the proposed premium increases are “shockingly higher than expected.” Insurers in Connecticut are seeking an average increase of 26.8 percent for individual plans, according to filings earlier this month.
The state has already planned public hearings for insurance giants Anthem and Aetna in August to discuss the rates.
“I have every expectation that our insurance department will find ways to improve the rates to be lower,” Wadleigh said in a recent interview. “In a perfect world, I’d love to get them down below 10 percent.”
Tough regulation on health insurers could also backfire, some healthcare experts warn.
Larry Levitt, senior vice president for the Kaiser Family Foundation, said if states are too aggressive, they could push struggling insurance companies out of their market and leave them with less competition.
“Insurance commissioners are in a tough spot this year,” Levitt said. “There will be enormous political pressure on insurance commissioners to scale back the hikes. But there’s also — it’s documented that many insurers have been losing money in the individual market.”
—Updated at 4:34 p.m.