Obama, NY health proposals aim to regulate rate hikes

President Barack Obama's proposal to give the federal government power to regulate health insurance rate increases is similar to what has already been proposed in New York.

In the current budget proposal, Gov. David A. Paterson has called for reinstating a requirement that health insurance rates be approved by the state insurance department. And the head of the Assembly's insurance panel, Joseph Morelle (D-Rochester), said he is working on a similar bill.

READ: Obama unveils last-ditch plan

JOYE BROWN: At 11 pages, finally a plan I can work with

ON LI: King rejects new plan, Dems supportive but skeptical

Before 1996, when much of New York health insurance was deregulated, the state approved insurance premium rate hikes for individual and small-business policies. Since then, the state cannot review rate increases before insurers send out their bills, although it can after the rates are set.

The state has argued this has led to annual rate hikes of about 14 percent for individuals and small groups, even though insurers are required to self-police and refund excessive premiums.

Between 1990 and 1995 - before deregulation - the insurance department said it reduced 24 percent of rates submitted by insurers. But from 1996-2007, health plans have reported excessive rates only 3 percent of the time, the agency said.

Between 2000 and 2007, health plans refunded about $48 million from self-policing; the state said it garnered an additional $105 million in overcharges after its investigations.

"My hope is that we will advance a proposal that will restore the prior approval system," Morelle said, adding that his version will differ from the governor's by providing more transparency to ensure rates aren't kept low for political reasons, threatening insurers' solvency.

And he said he didn't support Obama's proposal. "Why the federal government wants to be in the middle of the insurance business, I don't understand," he said. "The states can do this."

Leslie Moran, senior vice president of the New York Health Plan Association, which represents 23 health plans statewide, called both the Obama and state proposals "price fixing." "We don't think it's necessary, and it doesn't get at the real problem of how do we bring down the actual costs of insurance," she said.

Any attempt to keep premiums artificially low would undermine insurers' solvency, she said. Health insurance in New York was deregulated after the state suppressed rates for its biggest health insurer, Empire BlueCross BlueShield, which endangered its financial health, she said.

Moran said insurance premiums for individuals and small groups have risen because of increased health care costs, not profits - especially among those who have individual insurance.