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Florida lawmakers have left the state vulnerable to unreasonably high insurance premiums in an effort to undermine Obamacare, say the state’s U.S. House Democrats.
Gov. Rick Scott and the Legislature cynically stripped Florida of its ability to review rates for the law’s rollout, U.S. Rep. Ted Deutch writes in a letter signed by all 10 of the state’s Democratic representatives.
The letter, which appeals to the federal government to step in on Floridians’ behalf, blames a law Scott signed at the end of May for refusing to allow the state insurance commissioner to "negotiate lower rates with companies or refuse rates that are too high."
It asks the U.S. Health and Human Services Department to "protect Florida consumers — since Gov. Scott, the Florida Legislature and Insurance Commissioner (Kevin) McCarty will not."
Did the governor and state legislators prevent the insurance commissioner from negotiating lower rates and refusing high ones?
Deferring to the feds
Legislators faced a unique challenge during their 60-day session in 2013. Unlike many states that had laid groundwork to implement the Affordable Care Act since it became law in 2010, Florida had repeatedly refused — first challenging the constitutionality of the law, then waiting to see if a new president would offer a reprieve.
But with the law upheld by the Supreme Court and President Barack Obama back in office, the state was stuck. It had refused federal money to help with the transition. Now it was also running out of time.
A state Senate committee in 2013 said it sought a "rational, reasonable approach." State law needed an update to match federal requirements of the Affordable Care Act. The committee sought to do as little as possible.
"We want to make sure that we're in compliance, that we're doing what we're required to do," said Sen. David Simmons, R-Altamonte Springs, at a March committee meeting.
The Affordable Care Act assumed that states would continue to take a lead role in setting insurance rates, just as Florida had done in the past. It encouraged states to strengthen their rate-setting authority, offering millions of dollars in grant money to help. But it didn’t require that.
The Florida Office of Insurance Regulation faced a serious time-crunch to get up to speed on a host of new requirements under the law. Legislators offered a compromise. If the federal government wanted to impose new coverage requirements — well, it could set rates, too.
"Since the federal government is requiring these additional coverages that will cost more," said Sen. Joe Negron, Republican chair of the Affordable Care Act Committee, "then to me it makes sense for them to be responsible for approving rate increases that are certain to come."
Democrats on the committee agreed with this approach at its final meeting on March 18.
"I think we're going to find it's going to cost us a lot of money to set rates here in Florida," said Sen. Eleanor Sobel. "... I think we should rely on the federal government."
She expressed confidence the federal government would have a "greater wealth of knowledge."
"If we have concerns about the rates that the feds do set, then we should work with them," she said.
One hitch she didn’t mention: the federal government didn’t give itself rate-making authority.
What resulted was Florida Senate Bill 1842, which among other things, suspended for two years the requirement that insurers get state approval for rates for new plans — such as those that will appear on new marketplaces. Companies would still have to file rate changes with the state. But they could act on those changes without approval.
Sobel now says that wasn’t at all clear at the time.
The bill earned unanimous support from the Senate Appropriations Committee, then passed the Senate 28-8, mostly along party lines. Six senators voted after roll call, including Sobel, who changed her vote from yea to nay.
"I was reading very quickly. Then I realized this was something that was not good for the people of the state of Florida," she said.
The 78-36 House vote also mostly followed party lines, with a few Democratic supporters.
Gov. Scott expressed the same confidence that the federal government would step in.
When he signed the bill into law May 31, he wrote, "I support the Legislature's deference to the federal government. ... Rates for the new plans will be reviewed by the same federal government that will be enforcing and updating new rules and regulations throughout this very fluid and uncertain transition period."
Limits of federal authority
Here’s the thing: The federal government, even under the Affordable Care Act, can’t do what Insurance Commissioner McCarty can do.
Florida grants its insurance commissioner a range of powers. McCarty can negotiate lower rates with companies. He can refuse rates that the state determines to be too high.
The federal government can do neither of those things.
On July 31, the Florida Office of Insurance Regulation released projected insurance premiums for policies that will be for sale on the new health insurance marketplaces launching in January 2014 — premiums it has no authority to review.
The state estimated rate increases in the individual market between 8 percent and 59 percent. (The federal government and consumer groups, we should note, dispute the state's projections, with one group suggesting they're inaccurately and irresponsibly high to discourage Floridians from participating in Obamacare.)
In a bulleted list, the office noted all of the ways the Affordable Care Act might be driving up costs.
It didn’t mention McCarty had no power to negotiate or refuse because of the new law.
And that matters. A Kaiser Family Foundation study in 2010 found that those states with robust authority to approve or disapprove rates were "able to extract significant reductions."
While Florida used the Affordable Care Act as a reason to reduce its rate oversight, most states used the law’s grants to boost theirs. North Carolina reduced a rate increase request with its new authority in 2010 that saved beneficiaries $14.5 million.
The Palm Beach Post noted that Maryland used its negotiating power to push rates for next year’s premiums down "by as much as a third" from what companies had proposed.
In the absence of oversight from Florida, the federal government does have some power to protect Florida consumers from outrageous rates — even if it can’t rescind them or otherwise impose penalties.
Chief is the new requirement that insurers must spend at least 80 percent or 85 percent of premiums on medical care, or pay rebates. So, if an insurer filed for a rate increase that granted it profits far beyond the benefits it offered, it would owe consumers a rebate the next year.
Second, it could refuse to let an insurer sell its product on Florida’s federally run marketplace. But not all insurance will be sold through the marketplace. Meanwhile, the process was supposed to rely on states’ determination of whether a rate was justified.
Lastly, it wields shame. If Florida doesn’t weigh in, the federal government will review any increase greater than 10 percent to evaluate whether it’s unreasonable — a designation the insurer will have to feature on its website.
A letter from Deutch and Florida’s U.S. House Democrats says that the governor and legislators refused to allow the state insurance commissioner to "negotiate lower rates with companies or refuse rates that are too high." They did precisely that, though they argued that the federal government could step in on Florida’s behalf. It turns out, that’s not how it works. Deutch’s claim about the state’s temporarily diminished powers is True.
U.S. Rep. Ted Deutch, D-Fla., letter to HHS Secretary Kathleen Sebelius, Aug. 1, 2013
Email interview with Ashley Mushnick, communications director, U.S. Rep. Ted Deutch, Aug. 5, 2013
Email interview with Amy Bogner, deputy director of communications, Florida Office of Insurance Regulation, Aug. 5, 2013
Email interview with John Tupps, spokesman, Gov. Rick Scott, Aug. 5, 2013
Interview with Florida Sen. David Simmons, R-Altamonte Springs, sponsor of S.B. 1842, Aug. 6, 2013
Interview with Florida Sen. Eleanor Sobel, D-Hollywood, Aug. 8, 2013
Email interview with Fabien Levy, press secretary, U.S. Health & Human Services Department, Aug. 6, 2013
Gov. Rick Scott, signing letter for S.B. 1842, May 31, 2013
Office of the Attorney General of Florida, "The States' Lawsuit Challenging the Constitutionality of the Health Care Reform Law," accessed Aug. 7, 213
Sen. Bill Nelson, "Tallahassee bill stops insurance commissioner from killing rate hikes," May 22, 2013
Federal Register, "Department of Health and Human Services — 45 CFR Part 154 - Rate Increase Disclosure and Review," May 23, 2011
Center for Consumer Information & Insurance Oversight, "Review of Insurance Rates," accessed Aug. 6, 2013
Center for Consumer Information & Insurance Oversight, "Over $100 Million to Help States Crack Down on Unreasonable Health Insurance Rate Hikes," Sept. 20, 2011
Center for Consumer Information & Insurance Oversight, "State Effective Rate Review Programs," accessed Aug. 6, 2013
Center for Consumer Information & Insurance Oversight, "Medical Loss Ratio," accessed Aug. 6, 2013
U.S. Health & Human Services Department, Letter to Commissioner Kevin McCarty, March 12, 2013
National Association of Insurance Commissioners, Rate Review White Paper, June 27, 2012
Florida Office of Insurance Regulation, "Federal Health Care Insurance Reform," accessed Aug. 5, 2013
Florida Office of Insurance Regulation, "Office Releases Data on Projected Health Insurance Premiums for PPACA Policies," July 31, 2013
Florida Office of Insurance Regulation, "Individual Monthly Health Insurance Premiums Before and After PPACA," July 31, 2013
Florida Office of Insurance Regulation, "Health Insurance Plans by Company," July 31, 2013
Florida Office of Insurance Regulation, "Health Insurance Plan Distribution by County," July 31, 2013
Florida Office of Insurance Regulation, "Patient Protection & Affordable Care Act (PPACA) Overview — Senate Select Committee on PPACA," Feb. 18, 2013
Florida Office of Insurance Regulation, "Patient Protection & Affordable Care Act (PPACA) Overview — House Select Committee on PPACA," Jan. 25, 2013
Florida Office of Insurance Regulation, "Insurance Issues Potpourri: Recent Insurance Developments — Remarks by Florida Deputy Insurance Commissioner Mary Beth Senkewicz," Sept. 13, 2010
Florida CHAIN, "Consumers Placed at Risk by Legislature’s Rejection of ACA Reforms: Explanation of SB 1842," May 10, 2013
Kaiser Family Foundation, "Beyond Rebates: How Much Are Consumers Saving from the ACA’s Medical Loss Ratio Provision?" June 6, 2013
Kaiser Family Foundation, "Rate Review: Spotlight on State Efforts to Make Health Insurance More Affordable," December 2010
Kaiser Health News, "State Premium Watch: Pricing In The New Insurance Marketplaces," Aug. 4, 2013
Government Accountability Office, "Subject: Private Health Insurance: The Range of Base Premiums in the Individual Market by State in January 2013," July 23, 2013
PolitiFact Florida, "Bill Nelson says Rick Scott returned a $1 million grant to strengthen reviews of insurance rates," June 11, 2013 (Mostly True)
PolitiFact, "Gov. Rick Scott says 'Obamacare' is 'not the law of the land,'" Dec. 1, 2011
Tampa Bay Times, "Scott says Florida won't implement health care law," June 30, 2012
Tampa Bay Times, "In fighting health care law, Florida rejects millions in federal aid," June 8, 2011
Tampa Bay Times, "Average individual health plans in Florida to rise about 35 percent, state says," Aug. 1, 2013
Palm Beach Post, "As details of health insurance rates emerge, 2013 Florida law limits power to control them," July 31, 2013, subscription only
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