NYSCOP: Reinstating Prior Approval a Mistake

Legislation is bad public policy that does not address the core issues driving the cost of health care.

ALBANY, NY (06/09/2010)(readMedia)-- The New York State Conference of Blue Cross Blue Shield Plans (NYSCOP) today expressed complete disappointment as the legislature enacted government-imposed price controls through the reinstatement of "prior approval" of health insurance rates.

Specifically, the measure grants the superintendent of insurance unparalleled discretion and authority to approve, modify or disapprove rate applications, in effect implementing government-imposed price controls over individual and small group health insurance rates.

"This is bad public policy," said Deborah Fasser, spokeswoman for NYSCOP. "The way it was patched together and passed along with the one-week budget extenders is yet another classic example of what is wrong in Albany. Instead of working together with the numerous stakeholders, this measure was rushed through and passed unconventionally. It will not give lawmakers the outcome they are looking for. It will not make health insurance more affordable."

This vague legislation contains no definitions and is coupled with an exceedingly long timeframe for the Insurance Department to approve or deny a rate increase. "This will result in delayed rates, which will wreak havoc on small business and individuals trying to budget for health care expenses," said Fasser.

"Once again, the Governor and the Legislature failed to think through the process, for example, federal reform will create an enormous workload on the state Insurance Department as they will be forced to approve policies and rates for thousands of products over the next several months," said Fasser. "The Department cannot keep up with the demand of these voluminous filing and compliance issues resulting from federal reform and the reimplementation of the archaic structure of prior approval."

Price controls have never worked, in health care or any other market. New York found this out the hard way in the 1980s and early '90s when prior approval failed miserably. It was because of this failure that in 1995 the New York legislature unanimously voted to eliminate prior approval. Health plans simply could not afford to deliver care at the rates mandated by the state.

"Lawmakers must acknowledge the real factors driving up health insurance premiums, such as insurance taxes, and enact policy initiatives designed to reduce rising costs," said Fasser. "Imposing government price controls where the rates are left to the subjective whim of a political appointee is just another political game. All this measure will do is artificially suppress rates which, in turn, will lead to a decline in provider reimbursement, a spike in premiums when politically tolerable and job losses in the health insurance industry."

***

The New York State Conference of Blue Cross and Blue Shield Plans (NYSCOP) is a partnership of Rochester-based Excellus Blue Cross Blue Shield and New York City-based Empire Blue Cross Blue Shield. Together, the two health insurance plans provide comprehensive health coverage for millions of New Yorkers and are dedicated to educating the public through in-depth research and analysis of the cost, access and quality of health care.

–30–