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EDITORIAL: The Cost of Not Knowing

December 20, 2012

By Monica J. Lindeen, Commissioner of Insurance, and Rep. Jeffrey Welborn, R-Dillon

More than a decade ago, then-Secretary of Defense Donald Rumsfeld famously summarized a quandary we face in national security: there are things we know, things we know we don't know, and things we don't know we don't know.

Rumsfeld took flak in the media for his wordplay, but the concept he tried to express is one that we face both in and out of the national security arena.

In health insurance, for example, we know the cost of insurance and the cost of health care are out of control. Chalk that one up in the "things we know" category.

Because insurers aren't required to share their premium information with the state, we also know that we don't know how insurance companies are setting their rates. That falls in Rumsfeld's second category -- the known unknowns.

But that's not the case across the country. In fact, Montana is now one of only two states without information about how health insurers set their rates for individuals and families.

In every other state, insurance companies file their rates with the state insurance regulator who reviews rates to make sure they are reasonable and justified. Normally, it's hard to put a price on "reasonable" and "justified." But today, we can compare the rates we see in Montana with other states and get a good sense of the price gouging going on in Montana.

Take the example of a national insurer that recently instituted an average rate increase in Montana of about 18 percent. Several other states, like South Dakota and Kansas, saw the same company propose average rate hikes in the same neighborhood.

The Kansas insurance commissioner reviewed the rate, decided it was excessive, and negotiated with the insurer to cut the average rate hike in half. In South Dakota, the state found the rate excessive and worked with the company to bring the average rate increase down to just 6.5 percent.

But here in Montana, where we have no rate review authority, the insurer went ahead with the rate as planned. That means Montanans paid a hefty price for not knowing how rates are set. In the broader scheme of things, it also means Montanans are paying more so the company can offer lower rates in other states.

To put it lightly, this is unfair to all Montanans. Health insurance is expensive enough when rates are reasonable and fully justified. That's why we're working on bipartisan legislation to finally give Montanans the benefit of health insurance rate review.

It's worth noting that the Insurance Commissioner reviews rates in most other types of insurance in Montana, from auto and home to Medicare supplement and long-term care insurance. Health insurers should play by the same rules and file their rates with the Commissioner.

Our proposal, HB 87, would give the Montana Insurance Commissioner the ability to review rates before they take effect and negotiate down unjustified rates. It's a commonsense measure that would make health insurance more affordable and transparent. With support from industry groups and consumer advocates alike, HB 87 should be a no-brainer.

Nearly every other state in the country has seized on the opportunity to flex local authority with state-based rate review. They have shown how leveraging rate review can protect consumers. Best of all, state-based rate review laws -- including our proposal -- maintain local control instead of handing it to the federal government.

Ultimately, rate review can't solve all of the problems we face in health insurance and health care, but it does relieve Montanans of the heavy cost we pay for not knowing how rates are set. Let's work together and put an end to the unknowns of health insurance rating, once and for all.