Customers, businesses need oversight on insurance rates
THE ISSUE
An insurance company's premium increases are the first since a state law that governed rates expired.
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RATE increase announced by one of the two dominant health insurers in Hawaii serves as a reminder that state officials no longer have any say in how much companies can raise premiums.
In a state that's often criticized for its heavy regulatory climate, it is ironic that oversight of a service critically important to businesses and consumers lapsed this year, leaving Hawaii as one of only four states without some kind of check on health insurance costs.
The state Legislature, which failed to extend a law that required supervision due to a flawed bill, should correct its mistake and reinstate the provision next year. Moreover, lawmakers should consider dealing with health care as a medical and social need rather than a market commodity.
The average 3.75 percent increase in premiums Kaiser Permanente Hawaii will impose starting Jan. 1 falls below raises in 2004 and 2005 when rates went up 11.7 percent and 11 percent respectively. Though modest, Kaiser clients have no way of knowing whether the newest increases are warranted.
During the legislative session, J.P. Schmidt, the state insurance commissioner, estimated that oversight during the three years the law was in effect saved Hawaii residents and businesses more than $18 million directly by reducing rate increase requests that weren't justified.
Without regulation, Schmidt told the Star-Bulletin's Dave Segal, insurance companies don't have to seek approval and don't have to file any information about their needs for raises. Though there's no apparent reason to doubt Kaiser's assertion that its increased costs and new programs necessitate raising premiums, there is no independent accountability for consumers.
The commissioner did not always reduce an insurer's request. In the last rate approval before the law expired, the Hawaii Medical Service Association, the largest health insurer in the state with more than 700,000 members, asked for and received a 3.8 percent increase.
State lawmakers maintained that they intended to extend regulation, in part because Hawaii law requires employers to provide health insurance for their workers. Many in the business community -- which usually opposes government regulation -- favored it because the transparency helped employers analyze benefits and control costs.
But legislators fumbled the bill in the waning days of this year's session, allowing an incorrect effective date to remain in the measure's final draft. Fixing the problem would have forced extending the session and the bill was allowed to die. It should be resurrected, fixed and passed into law next year.
