HELENA – After supporting the national health care reform law in 2010, Democratic U.S. Sen. Jon Tester is looking to give governments across the land even more power in deciding what health insurers charge for their products.
Late last month, Tester announced his signing on to California U.S. Sen. Dianne Feinstein’s bill to permit state insurance commissioners to block proposed health insurance premium increases. The bill, officially S.137, awaits formal hearing in the Senate Committee on Health, Education, Labor, and Pensions.
For Tester, the support reveals one of two things: He either needs to pay back a powerful senator for her aid in filling his campaign coffers or he’s looking for political cover after throwing his weight behind the national health reform law.
The timing of the support is somewhat curious. Tester officially signed on to the bill August 20, becoming the 8th U.S. Senate co-sponsor. He released a statement announcing his support.
“This bill will hold insurance companies accountable and keep health insurance affordable for thousands of Montanans,” Tester wrote in an Aug. 20 press release.
Yet, the bill is likely dead in the Senate panel. It hasn’t moved since Jan. 11, 2011 and swirls around the dredges of the Senate committee.
Why the Tester endorsement? It might be returning Feinstein a favor.
- The California Democrat is running a subdued contest for re-election this year and while she has no need of raising money for her own race, in June she brought in Tester, North Dakota’s Heidi Heitkamp and Nebraska’s Bob Kerrey – all Democrats in tight Senate races – to squeeze wealthy California donors on the troika’s behalf.
A cool $15,000 allowed donors entry in Feinstein’s California home. The money raised didn’t go directly to Tester, Heitkamp or Kerrey, but instead flowed to the Heartland Victory Fund, a front for the Act Blue political action committee, a Democratic fundraising powerhouse.
According to OpenSecrets.org, an online campaign finance tracking tool housed by the Center for Responsive Politics, Act Blue has donated $132,000 to Tester’s campaign coffers this year alone. In 2006, Tester’s first run at the Senate, the group sent more than $85,000 his way.
Of course, Tester might have backed the bill simply to gain favor with Montana voters wary of his support of President Barack Obama’s signature health law, passed in March 2010. Tester’s November foe, Republican U.S. Rep. Denny Rehberg, and outside spending groups target that vote in tying the first-term Democrat to Obama, a polarizing figure among Montanans.
While conservative groups howl about Tester’s health reform vote, noting the law’s estimated $1.2 trillion price tag, the Democrat can use his S.137 support to display his dedication to keeping health costs low.
Though voters might not immediately feel or realize the enormity health law’s costs, their health premium prices hit squarely in the pocketbook.
Feinstein’s proposal is problematic, however, for a number of reasons.
The legislation would allow state insurance commissioners to block any health insurance rate hikes they deem unjustifiable and unreasonable, essentially meaning government bureaucrats engage price controls.
Of course, the health reform law already features some price controls. The 80/20 rule, as it’s known, mandates health insures spend 80 percent of revenue on medical costs for customers. Carriers use the other 20 percent for administration, marketing and profit.
Rate review, another price-control feature of Obama’s health reform law, is a mechanism Feinstein and Tester hope to tweak with their legislation. Rate review empowers state insurance commissioners to assess all health carrier premium increases more than 10 percent. If a commissioner believes a rate increase request is too high and unreasonable, he can deem it so on a state website.
Some state legislatures allow their insurance commissioners to reject over-the-top rate increases, while states like Montana and Idaho do not. If states don’t monitor rate increases, the U.S. Department of Health and Human Services takes over, yet the feds still don’t have the power to block unreasonable increases.
Rate review proponents are quick to tout the savings gained under the process. A report released Tuesday marking the one year anniversary of rate review under the health care law revealed the process saved consumers at least $1 billion on premiums.
“The health care law is holding insurance companies accountable and saving billions of dollars for families across the country,” HHS Secretary Kathleen Sebelius said in a press release Tuesday. “Thanks to the law, our health care system is more transparent and more competitive, and that’s saving Americans real money.”
Yet, one expert believes price caps enacted under rate review will eventually put health carriers out of business.
Sally C. Pipes, a health policy analyst for the Pacific Research Institute, a conservative think tank based in California, wrote last year that health insurers working under the Massachusetts health reform law – the one liberals label Romneycare in homage to GOP presidential nominee Mitt Romney– aren’t high on rate review price controls.
“Last year (2010), Massachusetts officials tried to crack down on health insurance rates, rejecting 253 of 274 proposed rate hikes across the state,” Pipes wrote. “Chaos ensued. The small-group health insurance market, which served 800,000 of the state’s residents, briefly shut down. Later in the year, all four of the state’s biggest health insurers reported that they’d lost money as the price caps were implemented. Three explicitly attributed their losses to the state’s rate rejections.”
The PRI analyst explains that while price caps might be a temporary stopgap solution to rising health care costs, they aren’t sustainable for private companies.
- “Insurers can’t endure state-mandated losses forever. Eventually, they’ll have to shed jobs or exit the market entirely. Consumers would be left with fewer choices,” Pipes warned.
Monica Lindeen, Montana’s insurance commissioner, asked the state legislature for rate review permission last year, but lawmakers soundly rebuffed her. She told the Helena Independent Record this week she will again pursue rate review authority next year if she wins re-election in November.