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Amy Traub

The Bad News Is, The Boss Can’t Afford To Provide Health Insurance Anymore. The Good News Is, It’s Consistent with the National Average

Health insurance premiums for New York's small businesses are soaring out of sight, but these premiums track the national average more closely than ever before. And that's why we should stick to a policy of loosening regulations on the insurance industry.

It doesn't make sense to me either, but that's exactly the argument offered by the Manhattan Institute's Empire Center for New York State Policy in their new health care bulletin. The claim is that recent efforts to reassert some public oversight of out-of-control health insurance premiums will not effectively reign in insurance costs. Instead, the Manhattan Institute argues, we should allow insurance companies to stop providing coverage for needed medical care and hope that they'll cut costs as a result.

I'll deal with the second part of this very dubious claim in a future blog post, but the first part, about the benefits of deregulating insurance rates, deserves its own discussion.

At issue is a proposal requiring New York health insurers who want to raise their rates to first get approval from the State Insurance Superintendent. Insurance company representatives would be required to justify proposed rate increases at a public hearing and open their books so that the Insurance Superintendent can determine whether an increase is really warranted because of higher costs, or if additional revenue would only serve to fatten the corporate bottom line. If an increase isn't warranted, the Insurance Superintendent could reduce it or reject the proposed increase entirely. New York had such a system for decades, weakened it in 1996 after industry lobbying, and phased it out completely (yes, more industry lobbying) in 2000.

Now, facing soaring insurance premiums accompanied by sky-high insurance industry profits, everyone from Republican Insurance Superintendent Howard Mills to the Democratic Assembly Insurance Committee Chair Pete Grannis advocates bringing back some public oversight.

The Manhattan Institute thinks bringing back rate regulation a bad idea. Their bulletin claims that rate regulation "can actually boost premiums" but that's not what their own numbers show at all. Instead the Manhattan Institute brief reveals that from 1996 to 1999, when insurance companies could not raise rates more than ten percent without State Insurance Department approval, health insurance premiums for small businesses increased 16 percent, at an average rate of 4% a year. After 1999, when the regulation was scrapped, premiums shot up by 8% a year, double the annual rate before deregulation, for a total 40% increase between 1999 and 2003.

Considering the Manhattan Institute's own numbers show rates going up more quickly after regulations were loosened, what's supposed to be so good about deregulating? After deregulation, the bulletin points out, New York's small business insurance premiums "moved closer to the national average." So the Manhattan Institute is suggesting that small businesses struggling to provide health insurance to their employees shouldn't worry about whether their actual premiums are going up and how much, but should care instead about how closely these premiums are tracking the national average for insurance premiums. To put it mildly, this logic is far from the way health care consumers really think.

To put it less mildly, the new Manhattan Institute bulletin uses tortured logic to promote an agenda of deregulation and soaring insurance industry profits at the expense of New Yorkers struggling to hold onto their health coverage, small businesses scrambling to afford employee coverage, and the state's three million uninsured. And you thought insurance was boring.

Amy Traub: Author Bio | Other Posts
Posted at 7:33 AM, Mar 29, 2006 in Health Care | Insurance Industry
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