In a shot across the bow to the insurance industry Tuesday, President Obama warned companies facing higher costs in part because of his health care law not to hike their prices, saying “we’ll be watching closely.”
Backing up his rhetoric behind the scenes, the Department of Health and Human Services (HHS) is quietly working on a new regulation to determine when insurance price increases are “unreasonable” and potentially prohibited by law.
The move may provide political cover heading into November’s elections as the President tries to keep the public from linking recent premium hikes to his newly-passed health care law.
But critics warn price controls could lead to either rationing or insurance companies going out of business, and point to Massachusetts’s experience with insurance price controls as a cautionary tale of what happens when pricing “turns political.”
Proponents, meanwhile, say without strict controls, the design of the health care law will lead to dramatic premium spikes. They also point to California regulations on automobile insurance as an example of where insurance price controls have been successful.
State regulators May 12 floated ideas to HHS about how to best institute the controls. The states said HHS should establish a set of criteria to flag price increases as “potentially unreasonable,” leaving HHS Secretary Kathleen Sebelius to make a final decision on whether a price hike is justified.
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