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Illinois Considers Creating Board to Reject Insurance Price Increases

June 28, 2019

The Illinois House passed a bill that would authorize the state’s Department of Insurance to reject health insurance price increases it deems unreasonable.

The bill is in response to rising premiums on the Obamacare health insurance exchanges. Illinois House Bill 815, the Freedom from Aggressive Insurance Increases Review Act, would create a review board with the power to deny or approve insurance price increases for small businesses and individuals. Currently, insurance regulators can question price increases but not stop them.

Supporters of the bill say it would protect consumers and small businesses from exploitation by insurance companies. Opponents say it would destabilize the health insurance marketplace and wouldn’t address the problem of rising costs of treatment and medication.

The bill passed 73-41 and is awaiting a hearing in the Illinois Senate.

Warns of Lost Access

The bill would authorize the review board to reject any price increase deemed “excessive, unjustified, or unfairly discriminatory,” it states. The bill does not specify how the review board would determine what constitutes a “reasonable” price increase.

David Hyman, a medical doctor, Georgetown University law professor, and coauthor of Overcharged: Why Americans Pay Too Much for Health Care, says a major unintended consequence of this legislation would be a reduction of access to services, because the price review board might not consider actual market prices, which would discourage providers from offering those services.

“The consequence of that is you'll see distortions in other parts of the system,” Hyman said. “Certain kinds of services may no longer be paid for when, in a well-functioning market, they would have been.”

Misplaced Emphasis?

Opponents of H.B. 815 say it does not address the stated problem of high medical costs. The average annual insurance cost per person in the United States has risen by more than $2,000 since 2010, according to U.S. federal spending records. Hyman says the bill fails to address insurance price increases because it can’t get to the root of high health care costs: the third-party payer system and health care policy influenced by politics.

 “Ask yourself to what extent does this legislation actually attack any of those problems?” Hyman said. “The short answer is, ‘Really, not very much.’”

Some proponents of the bill argue insurance premiums go straight into the pockets of insurance executives, but Hyman says that’s not true.

“Even if you completely zeroed out the salary of the top five executives at every insurance company, you wouldn't have the slightest impact on the cost of their premiums,” Hyman said.

Expects Networks to Shrink

Hyman says the legislation would make insurers cut benefits in other areas to keep premiums low, such as limiting the network of providers they cover.

“The narrower the network, the more discounts that you can drive through the system, but there's a tradeoff in terms of access,” Hyman said. “If you went to the rate regulator and said, ‘You can do this, but the result will be [that] we're going to cut our network by some percentage,’ they might think very differently about it than if they think they’re just taking fat out of the system.”

Emma Kaden (ekaden@heartland.orgis an assistant editor at The Heartland Institute.