White House Is Spending Millions to Battle Obamacare Rate Hikes
Policy + Politics

White House Is Spending Millions to Battle Obamacare Rate Hikes

REUTERS/Joe Skipper

Amid reports that consumers could be hit with Obamacare health insurance premium hikes of 10 percent or more, the administration is providing state insurance regulators with $22 million to encourage them to beef up their reviews of requests for rate hikes from the health insurance industry.

The decision announced on Wednesday to provide states with additional resources to evaluate and challenge rate increases, in addition to undertaking other activities related to Obamacare, appears to be as much a political maneuver as another attempt to bend the health care cost curve.

Related: Get Ready for Huge Obamacare Premium Hikes in 2017

A new Kaiser Family Foundation analysis of Obamacare insurance markets in roughly a third of major metropolitan areas projects that premiums on the most popular silver plans will increase by an average of 10 percent to 11 percent next year, twice the rate of increase approved last fall. And that doesn’t include almost certain increases in co-payments or other out-of-pocket costs to consumers.

Obama administration officials reportedly are wary of the political impact of a rash of double-digit premium increases so close to the election, despite warnings from major insurance providers they will need higher revenues in order to remain in Obamacare. Millions of Americans are likely to get their first notice of Obamacare premium rate increases for 2017 shortly before the November election.

The Centers for Medicare and Medicaid Services said that the $22 million in grants will help in the planning and implementation of select federal market reforms and consumer protection, as well as “bringing down the cost of health care coverage.”

“State departments of insurance are vital to the oversight of health insurance plans,” the federal agency said in a statement. “These departments are responsible for making sure that premiums are reasonable and justified, ensuring company solvency, and protecting consumers.”

The federal government has no direct say over premiums charged in the Affordable Care Act exchanges. However, nearly all states and the District of Columbia have insurance departments or commission with the legal authority to review proposed rate hikes.

Related: This Obamacare Repeal Plan Cripples State Budgets—and Economies

Under this approach, health insurers are required to justify proposed rate increases to state insurance departments, some of which have the authority to deny “unreasonable” increases. By providing additional funding, federal health officials hope to encourage states to retain outside insurance experts to closely scrutinize the proposed rates and see if the hikes are justified.

But insurance industry advocates and some health care experts suggest the administration’s latest initiative is primarily designed to minimize a political backlash this fall, just before the election.

“I’m sure that any state would be happy to take free money, there’s no question about that,” Joseph Antos, a health care expert with the American Enterprise Institute, said in an interview on Thursday. “But this certainly has the looks of the administration wanting the insurance commissioners to bear down hard because it wouldn’t look good for the election to have really big rate increases.”

The new federal grants, touted by the administration as a way to “hold insurance companies accountable for unjustified hikes,” are likely to intensify tensions between the administration and health insurers, as The Hill first reported Wednesday.

Battered by soaring drug and health care costs and tumultuous changes in the market, U.S.  health care insurers have been warning since April about the probability of double-digit increases in premiums next year. They say the premium hikes are needed to overcome serious losses that are driving some major companies, including industry giant UnitedHealthcare, out of Obamacare insurance exchanges and that forced the closing of nearly half of the 23 non-profit co-ops.

Related: How Small Ideas Are Helping to Bend the Health Care Cost Curve

Many companies have also complained that they have received far less in federal “risk pool” reimbursements than they had counted on to offset unexpected losses in providing health insurance to an older and sicker population than anticipated.

For all those reasons, America’s Health Insurance Plans (AHIP), the major trade association for insurers, objects to the administration’s decision to try to toughen state rate increase reviews throughout the country. 

Clare Krusing, an AHIP spokesperson, told The Hill she was concerned that the increased federal assistance to state insurance regulators would turn the review process into “a political football."

"We believe the current rate review process is sufficient,” she said. “It needs to focus on the underlying cost-drivers of premiums."