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Amy Traub

New York Finally Puts a Lid on Health Insurance Profiteering

Yesterday Governor Paterson signed a bill giving New York the power to review increases in health insurance rates in the individual and small group markets. If insurers are raising rates higher or more quickly than is warranted, the state could veto increases before they take effect. The legislation will be a boon to small businesses in New York City and across the state, which currently pay sky high premiums to cover their employees.

The legislation is particularly timely now, as Pennsylvania’s insurance commissioner claims he has found evidence that health insurers in that state have been hiking rates not because of the growing cost of providing health care but simply “to pad revenues before federal health reforms are fully implemented.” Whether or not insurers are playing the same tricks right now in New York, a roll-back of the Pataki-era deregulation that sent insurance rates soaring is long overdue. Here’s what I wrote about the subject in 2005:

Imagine this: your insurance company wants to charge you more for health care, but they can't do it until you get a chance to look at their finances and see if the extra cost is legit. They can't do it until they hold a public hearing where you can tell the corporate bigwigs exactly what that extra cost will mean to you. And they can't do it unless our public officials sign off. As we heard at DMI's Marketplace of Ideas event on Monday that's exactly what Assemblymember Pete Grannis is trying to accomplish in New York

According to Crain's New York Business, State Insurance Superintendent Howard Mills also wants this ability to regulate health insurance rates. Crain's is surprised that an appointee of the generally anti-regulation Pataki administration would suggest new rules for insurance companies. But Mills recognizes it's both good politics and good policy.

It's good policy because health insurance rates in New York are out of control. Premiums hikes are in the double digits year after year and HMO profits keep going up. What's more, New York already regulates other kinds of insurance. When insurance companies wanted to raise their premiums for workers' compensation by a whopping 29.3 percent last year, the State Insurance Department took a look at their books and said it wasn't warranted. Employers across the state benefited when their insurance costs remained steady. Those of us struggling to afford health insurance should get the same opportunity.

As for the good politics: how would you feel about a public official who had successfully taken on the insurance companies and kept your rates from going up?

So why did it take so long for New York to move on this matter of good politics and good policy? Lobbying and generous campaign contributions by health insurers and their allies is the easy (and correct) answer. Yet they still needed someone to make the tortured case that, in fact, reining in insurance rates would actually be bad for New Yorkers. I have to admit, I enjoyed puncturing the Manhattan Institute arguments against this sensible regulation (here and here).

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Posted at 12:20 PM, Jun 10, 2010 in
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