With all of the focus on efforts to repeal the Affordable Care Act, another story about health care reform has gone largely unnoticed. The Obama Administration has been working furiously to draft the rules by which the new health care system will work. So far, they seem to be doing pretty well. But wouldn't you know it? The Republicans want to put a stop to that.
To get a sense of the work that's going on, take a closer look at the draft regulation the administration released on Tuesday. It coveres “rate review,” which gives state and federal officials the power to review proposed premium increases that seem "unreasonable." The Affordable Care Act doesn't give federal authorities the ability to reject such increases per se, although some states have that power already. But it would allow officials to block plans with high premium increases from the new insurance exchanges, where individuals and small businesses will be getting coverage.
The idea behind rate review, as you might expect, is to protect consumers from the large, double-digit rate hikes that make news from time to time. As you may recall, Wellpoint in California issued a series of such hikes earlier this year, not long after the Massachusetts special election that cost the Democrats’ their filibuster-proof super-majority in the Senate. The publicity over those hikes likely helped President Obama, Speaker Nancy Pelosi, and their allies to rally Democrats and finally pass the bill.
OK, but how well will rate review actually work? It’s impossible to say right now. The health insurance industry notes, correctly, that rising premiums reflect underlying forces in the health care system—too much wasteful treatment, monopoly power from some hospital groups, etc.—over which insurers have little control. Critics on the right maintain that the pressure will simply drive insurers out of business. But, again, rate review already exists in many states; the Affordable Care Act merely extends the practice nationwide. And nobody expects insurers to hold down on their own; this provision is one of literally dozens of cost control measures in the law, many of them targeting doctors, hospitals, and, yes, patients—all of whom will need to change their behavior if we are to reduce inflation.
A better question, perhaps, is whether the regulation is too weak. Under this new regulation, the “unreasonable” increase that triggers a review is 10 percent. That’s actually higher than what medical inflation has been lately, suggesting the standard may be too lax. Also, as Timothy Jost notes, the regulation doesn't apply to insurance from larger employers, even though that seems to be what the law anticipates. Still, it's within the individual and small business markets these outrageous rate hikes have been such a notorious problem. And administration officials and their allies think the negative publicity from rate review will make insurers think twice before jacking up rates. Remember that this is all taking place within the new insurance exchanges, where individuals and small businesses will (if everything works) be doing the kind of shopping and bargaing-hunting that most of them don’t, and can’t, do now. Among other things, the websites where people pick their insurance will state clearly whether a particular plan has been flagged for review.
Again, it's really hard to be sure about how the regulation will work out, particularly since it's one of so many moving pieces. But one hopeful sign about the administration's regulatory process so far is that most of the proposals are generating protests from the health care industry, but not threats or panic. That suggests the regulations are at least in the right ballpark--strong enough to change behavior, but not strong enough to cause the kind of serious disruption that would rattle the public and potentially make coverage less reliable, at least for the next two to three years. (Yes, I would prefer a reform that actually did disrupt things a lot more. But that’s a separate conversation.)
Of course, whether the administration can continue churning out these regulations is very much an open question. As Ezra Klein noted the other day, the temporary appropriations bill that Congress just passed in order to fund the government for the next three months doesn’t include money for implementing health care reform. It’s not clear exactly how big, or immediate, an impact that will have. The administration can shuffle funding here and there, plus infamous “doc fix” bill that passed a few weeks ago may have had some implementation dollars tucked into it. But it’s likely to cause at least some problems. And, what’s more, the Republicans have made very clear their intent to deny the administration the money it needs to implement health care reform. That fight is almost certainly coming soon.
It won’t be the first time a party in Congress used its power to appropriate funds in order to starve a policy it doesn’t like. But hopefully somebody on the other side of the aisle has started thinking about ways to make the Republicans explain, and defend, their actions. Defunding health care reform might not sound so appealing if, instead of stopping the IRS from collecting penalties, it means stopping government watchdogs from holding insurance companies more accountable.
By the way, funding government with these short, temporary measures won’t just hurt health care reform. David Herszenhorn had a good story about that in the New York Times on Wednesday.