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HHS Senior Advisor: Health Insurance Rates Unregulated in Missouri


KANSAS CITY, Mo. – Over the last year, state regulators in Oregon have ordered 20 insurance companies to either reduce or completely scrap proposed health care premium rate increases. The state deemed the increases - some of which exceeded 20 percent - to be too high. Other states have scrutinized similar rate hikes, but you won't find a challenge like that in Missouri. That's according to former Missouri Insurance Director Jay Angoff. Angoff has made a name for himself as a watchdog over the insurance industry and is now a senior advisor to HHS Secretary and former Kansas governor and insurance commissioner, Kathleen Sebelius.

KCUR's Elana Gordon recently caught up with Angoff outside a meeting in Kansas City to find out more about the situation in the Show-Me state and about possible changes to the insurance industry in the years ahead.


ANGOFF: Missouri is a very deregulatory state. That's not all bad, but Missouri does not have the authority to regulate rates that many other states have. So in particular in health insurance, most states have either the insurance commissioner must approve the rate before it takes effect, or the insurance commissioner has the authority to disapprove the rate after it takes effect. In Missouri, the commissioner has neither authority because in Missouri, health insurance companies don't even file their rates. So that's a very significant aspect of Missouri law which is different from and weaker than the laws in most states.

GORDON: You said that's not all bad?

ANGOFF: No one could ever accuse Missouri of being over-regulatory. And there are certain markets in which competition does work, and regulation is not needed. But with health insurance, where under current law anyway, it's very difficult for people to make apples-to-apples comparisons, studies have shown that rates in Missouri are higher than they would be if there were some type of regulation. In most states, if insurance companies propose to raise their rates, they've got to file a justification with the insurance department, they've got to explain how costs have gone up, they've got to explain their mix of businesses, and they've got to have a rational for their various assumptions they make on which they base their rate increase. In Missouri, they don't have to do any of that, and so some would view that as an advantage to the insurance industry. And it is one reason why rates in Missouri are as high as they are.

GORDON: You've spent a lot of your career looking at practices of insurance industries. Now that you are a senior advisor to HHS Secretary Kathleen Sebelius, how does that translate into your role now?

ANGOFF: Traditionally, insurance has been regulated at the state level. Insurance is the only industry that traditionally has not been regulated at the federal level at all. Now, state regulation of insurance is going to continue, but for the first time, there is some federal involvement.

GORDON: It's been a year since the federal health law was established - what's next?

ANGOFF: The exchanges have not taken effect. And exchanges are market places through which people will be able to make apples-to-apples comparisons of insurance companies selling policies of the same value, and they'll be able to compare price. We believe that that will facilitate price competition, and that that will create maximum incentive for insurance companies to drive down costs.

GORDON: And so what about a state like Missouri, where there isn't a whole lot of regulatory authority - what you're saying is with the development of these exchanges, we will we be seeing changes in that dynamic?

ANGOFF: Yeah, if the exchanges are structured properly, they will create a market place which will give individuals and small businesses the same bargaining power that large businesses will have. They will create a market place which will reward insurance companies who are good at managing care and improving quality and driving down costs. And they will ensure that insurance companies compete on the basis on price and quality and enable consumers to make apples-to-apples comparisons among policies of the same value, which again, will provide maximum incentive for insurers to drive down costs.

GORDON: A lot of trade groups and researchers have said that things like medical costs in and of itself and the costs of treatment are big drivers of costs. So how does that relate to some of these changes?

ANGOFF: Under current law, insurance companies can decline to insure people based on health status, and they can charge people more based on health status. Some insurance companies - not all - but some insurance companies today spend a lot of money trying to locate the best risks and trying to avoid the worst risks. They do that rather than spending their money on managing care and controlling costs. And they really have no incentive to manage care and control costs because they can simply pass on these price increases to consumers. In fact, there was an antitrust case brought by the Department of Justice a few months ago against Michigan Blue Cross*, alleging that Michigan Blue Cross and some of the health care providers had conspired to raise health care costs and pass those increases through to consumers. So today, it's easy for insurers to pass health care costs through to consumers. If the market is structured correctly, as it will be through these exchanges, insurers will have the incentive to drive down costs for the first time.

*The federal antitrust investigation into Michigan's Blue Cross has widened to include companies in Missouri and Kansas.


That was Health and Human Services Senior Advisor Jay Angoff, speaking with KCUR's Elana Gordon. Angoff was director of Missouri's department of insurance between 1993 and 1998.

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