Should High Rate Increases Be Blocked?

A May 9 NY Times editorial argues for a national law to regulate health insurance rate increases.

This hodgepodge of controls over premiums needs to be backstopped by a national law that would allow the federal government to block unjustified rate increases where state officials lack the authority to do so.

But we already have a national law that regulates medical loss ratios (MLRs). The Affordable Care Act requires insurers to spend 80% and 85% of premium revenue on claims in the individual and group markets, respectively. The NY Times editorial does not even mention these required MLR minimums so I can’t know why the editors think they’re insufficient.

If MLRs are computed fairly and regulated adequately, the only source of health insurance rate increases will be medical costs. Why would we reject them in that case? It seems an unfairly punitive and misplaced focus. Insurers aren’t fully responsible for those costs. They’re the product of prices and utilization volume. Prices themselves are the consequence of negotiations between insurers and providers and are a function of the market power of both. Utilization is due to patient demand, in part provider induced.

The NY Times editors seem to recognize the fact that providers have a role to play. The editorial concludes,

Meanwhile, it is important to realize that the prime culprit in rising premiums is the escalating cost of medical care; the prices charged by health care providers and drug companies; and the ever-wider use of medical services, much of it unnecessary. Until those costs are contained, it will be hard to truly restrain premiums.

I agree. So, that being the case, why not argue for fair computing and strong enforcement of the MLR minimums and for something that might reduce the unnecessary use of high cost care? This doesn’t seem to be hard to grasp. Or am I missing something?

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