'We have empowered state insurance commissioners to review the rate hikes that are taking place in states. And in some states like North Carolina, they have already used it and rolled back premium increases by 25 percent.
In an interview on The Daily Show on Oct. 27, 2010, President Barack Obama took issue with host Jon Stewart's contention that the price control measures of the health care law won't take effect until 2014 when the health care exchanges are created. 'But up until that point, there's really nothing in this bill that doesn't allow these insurance companies to raise rates,' Stewart said. 'Not true,' Obama retorted. 'In fact, what we have done is we have empowered state insurance commissioners to review the rate hikes that are taking place in states. And some states, like North Carolina, they've already used it and rolled back premium increases by 25 percent.' There's a lot packed into the hundreds of pages of the Patient Protection and Affordable Care Act, and the issue of empowering states to limit rate hikes hasn't gotten much press, so we decided to take a look. First off, not every state's insurance commissioner has the power to regulate rate hikes. And many of those who do lack the resources to provide meaningful oversight. But as Obama said, the health care law seeks to address that. In all, the health care law provides states with $250 million over five years to help 'by improving how states review proposed health insurance premium increases and holding insurance companies accountable for unjustified premiums increases.' In August, the U.S. Department of Health and Human Services announced the first allotment of that money: $1 million each in grants to 45 states and the District of Columbia to help states 'crack down on unreasonable health insurance premium hikes.' According to an Aug. 16, 2010, press release from HHS, 'These Affordable Care Act grants will be used to help improve the oversight of proposed health insurance premium increases, take action against insurers seeking unreasonable rate hikes, and ensure consumers receive value for their premium dollars. For too long, insurance companies in many states have increased health insurance premiums with little oversight, transparency, or public accountability. Health insurance premiums have doubled on average during the last 10 years, much faster than wages and inflation, putting health coverage out of reach for millions of Americans and business owners. Today, just 26 states and the District of Columbia have the authority to reject a proposed increase that is excessive, lacks justification or otherwise exceeds state standards. Many states that have the authority lack resources to exercise it meaningfully. This lack of authority and resources for states has unfortunately contributed to unjustified premium increases in some states.' While many states used the money to hire personnel -- such as actuaries -- to help them scrutinize proposed rate increases, 15 states used some of the money to pursue additional legislative powers to review and regulate rate hikes. 'Will it be enough?' asked Betsy Imholz of the nonprofit Consumers Union. 'That remains to be seen.' Robert Hunter of the Consumer Federation of America said the health care law doesn't automatically grant regulatory power to states that don't already have it, as Obama's comment implies. The reality, he said, is that most states don't have the authority to regulate proposed premium increases. 'It varies from state to state,' Hunter said. 'Some insurance commissioners don't want to take on the insurance companies. Others don't have the regulatory authority to do it.' In the states that don't have regulatory authority, he said, 'the most they can do is jawbone.' That means they can try to persuade insurance companies to limit rate increases, but they don't have the power to enforce it. Nor is he convinced the measures in the health care law will encourage all states to step up their efforts. 'Most of the insurance commissioners are incredibly weak,' Hunter said. 'We'd be lucky if a third of the states do anything.' North Carolina, the state referenced by Obama, is one state that has done something. On Sept. 20, 2010, the North Carolina Department of Insurance announced that it had approved rate adjustments to some Blue Cross Blue Shield of North Carolina plans. The insurer had sought a 6.97 percent increase in premiums for Blue Advantage policies; but the department only approved a 5.37 percent increase (which will save policyholders $14.5 million). That's a 23 percent decrease in the proposed rate hike -- very close to Obama's claim of 25 percent. The North Carolina Department of Insurance noted it was the lowest Blue Advantage rate increase in four years. So Obama was close to the mark with the example he cited in North Carolina. As for the claim that the health care law 'empowered state insurance commissioners to review the rate hikes,' that's mostly accurate. The law did not expressly empower every state to regulate rate hikes, but it provided resources to states to do more meaningful reviews of proposed rate increases, and it provided money for 15 states to seek regulatory power. And so we rate Obama's claim Mostly True.
First off, not every state's insurance commissioner has the power to regulate rate hikes. And many of those who do lack the resources to provide meaningful oversight. But as Obama said, the health care law seeks to address that. In all, the health care law provides states with $250 million over five years to help 'by improving how states review proposed health insurance premium increases and holding insurance companies accountable for unjustified premiums increases.' In August, the U.S. Department of Health and Human Services announced the first allotment of that money: $1 million each in grants to 45 states and the District of Columbia to help states 'crack down on unreasonable health insurance premium hikes.' According to an Aug. 16, 2010, press release from HHS, 'These Affordable Care Act grants will be used to help improve the oversight of proposed health insurance premium increases, take action against insurers seeking unreasonable rate hikes, and ensure consumers receive value for their premium dollars. For too long, insurance companies in many states have increased health insurance premiums with little oversight, transparency, or public accountability. Health insurance premiums have doubled on average during the last 10 years, much faster than wages and inflation, putting health coverage out of reach for millions of Americans and business owners. Today, just 26 states and the District of Columbia have the authority to reject a proposed increase that is excessive, lacks justification or otherwise exceeds state standards. Many states that have the authority lack resources to exercise it meaningfully. This lack of authority and resources for states has unfortunately contributed to unjustified premium increases in some states.' While many states used the money to hire personnel -- such as actuaries -- to help them scrutinize proposed rate increases, 15 states used some of the money to pursue additional legislative powers to review and regulate rate hikes. 'Will it be enough?' asked Betsy Imholz of the nonprofit Consumers Union. 'That remains to be seen.' Robert Hunter of the Consumer Federation of America said the health care law doesn't automatically grant regulatory power to states that don't already have it, as Obama's comment implies. The reality, he said, is that most states don't have the authority to regulate proposed premium increases. 'It varies from state to state,' Hunter said. 'Some insurance commissioners don't want to take on the insurance companies. Others don't have the regulatory authority to do it.' In the states that don't have regulatory authority, he said, 'the most they can do is jawbone.' That means they can try to persuade insurance companies to limit rate increases, but they don't have the power to enforce it. Nor is he convinced the measures in the health care law will encourage all states to step up their efforts. 'Most of the insurance commissioners are incredibly weak,' Hunter said. 'We'd be lucky if a third of the states do anything.' North Carolina, the state referenced by Obama, is one state that has done something. On Sept. 20, 2010, the North Carolina Department of Insurance announced that it had approved rate adjustments to some Blue Cross Blue Shield of North Carolina plans. The insurer had sought a 6.97 percent increase in premiums for Blue Advantage policies; but the department only approved a 5.37 percent increase (which will save policyholders $14.5 million). That's a 23 percent decrease in the proposed rate hike -- very close to Obama's claim of 25 percent. The North Carolina Department of Insurance noted it was the lowest Blue Advantage rate increase in four years. So Obama was close to the mark with the example he cited in North Carolina. As for the claim that the health care law 'empowered state insurance commissioners to review the rate hikes,' that's mostly accurate. The law did not expressly empower every state to regulate rate hikes, but it provided resources to states to do more meaningful reviews of proposed rate increases, and it provided money for 15 states to seek regulatory power. And so we rate Obama's claim Mostly True.