Alternatives to Price Controls for Health Insurance

Some members of the healthcare community  believe  that the regulatory structure in the new health act confers an expost quasi- price control authority to the HHS insurance office.  However it should be noted that although  Congress addressed federal  premium review it  also granted considerable discretion  to HHS  to move towards  a joint federal -state partnership (with an emphasis on state)  for the review of premiums  because of the historical presence of state regulation which is  strengthened by an agressive federal grant program to state regulators.  Executive Order 12886 requires HHS to make a finding of compelling need prior to moving toward the federal price control scenario.

Although the PPACA gave joint authority to federal and state governments to review insurance premiums, it gave no authority to the federal government to regulate premiums through price controls.  The question  is whether HHS will institute a defacto price control program by leveraging its grants to the states and using  its review authority to coerce states into price controls.  CRE’s intent in this Forum is to make transparent any such moves by HHS.

The Premium Review Forum is the forum  used  to discuss the policy and economic implications of the said actions.  This forum, the Studies Forum, on the other hand, is dedicated to the review and analysis of  specific studies,  reports and websites  prepared or disseminated by the new HHS insurance office including studies dealing with price controls.  However the end objective  in both  forums is the same, to ensure that the  resultant regulatory structure is compliant with the applicable  “good government”  laws.

 The study we are presenting at this time is a study done by the Attorney General of Massachusetts which  focused the factors contributing to increases in healthcare costs. The preliminary report was issued in January, 2010.  The study is significant in that it appears, in the view of CRE and subject to public comment,  to demonstrate that premium increases are in large part based upon increases by hospitals and providers.

 The report states:

 “These findings have powerful implications for ongoing policy discussions about ways to contain health care costs, reform payment methodologies, and control health insurance premiums while maintaining or improving quality and access. “

 The conclusions in the report include:

  • Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and amongst providers offering similar levels of service;
  • Price variations for hospitals and physicians offering similar services are not explained by

             —    quality of care,

             —     the sickness or complexity of the population being served,

              —       the extent to which the hospital is responsible for caring for a large portion of patients on Medicare or Medicaid , or

              —       whether the hospital is an academic teaching or research facility;


 “We have found that the prices paid to hospitals do not correlate to the acuity or complexity of the cases handled by the hospital as measured by the hospital case mix index(CMI), which is calculated for each hospital in Massachusetts by the Division of Health Care Finance and Policy and publicly available on the Executive Office of Health and Human Services’ website.”

 Provider Groups

 “We also found that the total medical expenses (TME) associated with each provider

group do not correlate to the acuity or complexity of the populations served as measured by the health status score provided to us by health plans.”

 The study is available here.

 The study summary is here

 Please provide your comments by clicking on “Comments “ section in lower right  hand corner of this page or by making a separate post by making  a  post in the box to the right entitled “Studies and Concepts Under Review”;  in this instance you can also send attachment.

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