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Amid Spiraling Costs, Illinois Regs Call for Authority to Approve, Deny Health Rate Increases

Source: Chicago Sun Times

Posted on 09 Aug 2010

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In the face of skyrocketing costs that it believes are unjustified, the Illinois Department of Insurance says it will petition legislators for the authority to approve or deny health insurance rate hikes.

Currently Illinois regulators say they are powerless to stop rate increases, no matter how excessive, a situation that leaves thousands of residents scrambling to pay or risk losing their coverage.

"We've heard of companies increasing rates at just explosive levels, at abusive levels, and telling [policyholders] they're increasing rates because of health reform," Illinois Department of Insurance Director Michael McRaith said. "We don't have any authority to do anything about it."

Illinois received 186 complaints about rate increases from 2008 through 2010, according to an application submitted by the state insurance department for a $1 million federal grant that it says would enhance its efforts at oversight. McRaith said some people have complained of increases of up to 100 percent a year.

The grant, which may be announced Monday, would help the insurance department put more muscle into its rate review system, whether or not state lawmakers agree Illinois regulators should have a say over increases.

Medical inflation and the recession, which is forcing healthier people to drop coverage, are pushing up rates in the individual market, where the self-employed and others who aren't covered by their employers shop for health insurance, the industry says. Some insurers said they're exercising restraint and should be raising rates even higher.

"If premiums are not allowed to keep up with soaring medical costs, it could put at risk the coverage families and employers rely upon," said Robert Zirkelbach of America's Health Insurance Plans, the main industry lobby.

He said the industry opposes arbitrary caps on premiums and that if Illinois adopts rate approval, it should be based on objective criteria "to avoid a process that becomes arbitrary and politicized."

All insurance companies licensed in Illinois are for-profit, and state law doesn't require them to tell policyholders in advance about rate increases. It also doesn't restrict what premiums can be charged to individuals or employers with more than 50 workers. Smaller businesses have slightly more protection because state law limits how much premiums can vary from the norm.

McRaith said he's certain he'll be able to find lawmakers to sponsor a bill giving his department the authority to approve or deny increases, as about 25 other states do.

The new national health care law -- which will require most Americans to have health insurance by 2014 or pay a tax penalty -- included $250 million for states to improve their health insurance rate review systems. The federal government is expected to award the first of the grants soon.

Illinois' 81-page request portrays the state's current health insurance rate review system as ineffective, noting that the insurance department devotes just $80,000 a year to reviewing rates out of a $40 million annual budget and that a department staffer spends no more than an hour on each rate filing.