New York State Should Reinstate 'Prior Approval' on Insurance Premium Increases

Joe Morelle, Democrat & Chronicle Guest Essayist
February 7, 2010

Amid the many claims and counterclaims made during this past year's health care reform debate, perhaps one consensus remains clear: Medical insurance in the United States costs too much, and American families and businesses can't afford the continuing upward spiral of insurance premiums.

New Yorkers know only too well how true that is. In the years since deregulation prevented the New York State Insurance Department from reviewing proposed premium hikes a process known as "prior approval" rates have risen 81 percent, outstripping inflation and increases in real wages.

While the increasing cost of delivering medical care in part drives this trend, it is an enormous burden for the employers and employees who must pay the bills.

Last June, as chairman of the state Assembly's Committee on Insurance, I convened a hearing on the subject of prior approval, and the insurance department published its own report in conjunction with that hearing.

From 1990 to 1995, for instance, the insurance department reduced nearly one-quarter of rate requests after concluding that the increases were excessive. Since the end of prior approval, overcharging has cost policyholders more than $100 million by conservative estimates.

That is why, for the past two years, I have carried legislation calling for a return to prior approval as a means of ensuring appropriate checks on excessive premium increases. We must make certain that premiums are set according to actuarial information and the true price of doing business, rather than in the interest of maximizing insurance company profits.

This is consistent with my approach to health care reform, which over the past year has included successful legislation involving the overhaul of our managed care laws, extension of COBRA benefits and extended family coverage for young adults through the age of 29.

However, any move toward prior approval must be made within the context of significant changes resulting from federal health care reform.

Consumers must be protected from unduly high premium charges, while at the same time premiums must be set at a level that guarantees the financial solvency of the insurance carriers. I believe a fair, timely, data-driven process must be the goal in this critical matter.

Finally, we must recognize that while prudent regulation may provide a measure of restraint with regard to health insurance premiums, it will never be a complete cure.

Only when we acknowledge all the factors that drive the cost of medical treatment, including our own behaviors, lifestyles and attitudes, will we truly address what ails our health care system.

Morelle represents the 132nd district in the New York State Assembly and chairs the Assembly's Committee on Insurance.