Insurance-rate oversight OK'd by state Senate

The state Senate has overwhelmingly passed a measure that would restore authority to state officials to reject "unreasonable" rate increases for individual health-insurance plans.

Critics charge that the bill, which is also expected to pass the House, wouldn't actually give much relief to consumers who are reeling from steep premium increases. Nonetheless, it's expected to easily pass the House and cruise to the governor to sign.

The measure, Senate Bill 5261, would allow the Office of the Insurance Commissioner to review and approve annual rate increases for individual health plans. The state already has that power for small-group plans, but Insurance Commissioner Mike Kreidler and others have argued that the lack of oversight on individual plans has enabled insurers to raise premiums more than necessary.

All the state's major insurance companies oppose the bill, saying it would interfere in the market and wouldn't deal with growing medical costs.

But unlike last year, when the bill died in the House after clearing the Senate, the measure this time seems likely to become law. The Senate passed it on a 31-18 vote.

Critics say the bill would require insurers to pay out in medical claims as much as 77 cents for each premium dollar they collect, up from 72 cents currently. But even the insurance commissioner's office concedes the increase may not benefit consumers much: Almost all insurers already pay out more than that.

What's more, if the insurers pay out too little in medical claims, the extra premiums would be returned to the state, not to policyholders.

Still, Beth Berendt, Kreidler's deputy insurance commissioner for rates, said the bill would force insurers to think twice about inflating their proposed rate increases. Right now, insurers are required to simply notify the state of any rate changes.

The bill gives us "the ability to challenge assumptions that are unreasonable," Berendt said.

But the state's scrutiny might not have much actual effect on rates. For instance, between 2003 and 2007, the insurance commissioner's office reduced proposed premium rate increases for small-group plans by an average of just 1 percentage point annually. So instead of an average increase of 12.6 percent for each of those five years, consumers actually saw their rates go up by 11.8 percent.

Brian McCulloch, a Shoreline insurance consultant and a longtime Kreidler foe, calls the bill "almost meaningless."

McCulloch, who has twice run for insurance commissioner, supports another proposal, House Bill 1203, that would regulate premiums by limiting insurer surpluses, a financial cushion.

McCulloch says the state's largest insurance companies — Regence BlueShield, Premera Blue Cross and Group Health Cooperative — are sitting on a collective $1.4 billion in "excess" surpluses — money he argues should be returned to consumers.

Kyung Song: 206-464-2423 or ksong@seattletimes.com