Governor of New York Signs Bill Limiting Rate Hikes for Individual Health Insurance in Health Insurance News
This week New York Governor David Paterson signed legislation into law that will give the state 60 days to veto rate hikes in individual health insurance that are deemed excessive. The same law, which also applies to small business health insurance, had been previously phased out in 1997, during which time New York health insurance rates rose to record highs.
The new law will pertain to the policies of about 3 million New Yorkers, all of whom rely on individual or small business health insurance to meet their health care needs. New York has famously high prices for their insurance – running around $6,630 for single adults and $13,296 for families. This is twice the national average, according to recent polls on health insurance costs.
A similar bill has also been introduced in California legislation, and other states including Pennsylvania and Massachusetts are investigating similar legal avenues in order to control rising insurance premiums. In New Mexico the approval of individual rate hikes of up to 21% has drawn significant political backlash, and negative press aimed at the rate hikes has led to a public furor that other state officials seem to have noticed.
Secretary of Health and Human Services Kathleen Sebelius expressed support for Governor Paterson’s signing of the bill, particularly since her office had recently suggested that all states review their ability to control rising insurance prices in order to protect consumers from unfair rate inflation.
Under the new law, the state will have 60 days to veto individual health insurance rate hikes, and the state must provide reasonable data supporting the decision to deny the rate increase.
The insurance industry has countered claims of unfair rate hikes, suggesting that rising rates reflect the growing costs of health care, and that by limiting their ability to raise rates the state is placing unfair and unrealistic expectations upon insurance agencies.
Consumer advocate Mark P. Scherzer remarked that New York’s insurance companies were enjoying “outlandish profits” and that consumers will be saved a lot of money thanks to Paterson’s new law.
This type of law is seen as reflective of future state participation in all health insurance policies; insurance exchanges are slated to begin operation in 2014. At that time rate hikes will be legally overseen by the state and federal government, and spending on actual medical care (versus advertising and profits) will be mandated at 85%.
New York’s new law includes a similar mandate that requires health insurance companies to spend 82% of their profits on medical care, up from 75% for small business health insurance and 80% for individual policies.
