Statement of Chairman Tom Harkin (D-IA) at the HELP Committee Hearing "Protection from Unjustified Premiums"

“Good morning.  Today this Committee is holding its first hearing on health care since President Obama signed into law the historic Patient Protection and Affordable Care Act.  This Committee will be an active participant in implementation and oversight of that law.  As we all know, health reform is not complete with the signing of a bill, and we are fully committed to ensuring a smooth and successful implementation.

“A major goal of health reform is to bring down the cost of health care and to reduce health insurance premiums.  According to the independent Congressional Budget Office, reform will lower premiums by 14 to 20 percent for Americans buying insurance on their own. 

“Those significant premium savings are the result of bringing everyone into the insurance pool, as well as administrative savings from larger purchasing pools and prohibiting medical underwriting for health status and pre-existing conditions.  And of course, the Affordable Care Act includes an array of reforms to reward quality and value, which will reduce health care costs over the long term.

“But today, our focus is not on health reform and its impact on premiums.  Today our focus is on current market conditions and ensuring that premiums are justified – that working families’ hard-earned dollars are going toward premiums that truly reflect the cost of health care.

“I want to be clear that no one is talking about capping premiums or imposing price controls.  What we are talking about is protecting consumers from insurance companies’ jacking up premiums simply because they can.  Protections must be in place to ensure that insurance companies do not take advantage of current market conditions before health reform fundamentally changes the way they do business in 2014.

“The Affordable Care Act includes a requirement – effective in 2011 – that insurance companies spend at least 80 percent of premium revenue on actual health care.  This reform will provide an important check on unjustified premiums, and the CBO has said that it will in fact lower premiums.  In addition, the Act establishes a process for the annual review of premium increases prior to their use, and for public disclosure of how premium rates are determined.

“While all of this will benefit consumers tremendously – and very soon – we can and should do more.  Currently, about 22 states in the individual market, and 27 states in the small group market, do not require a review of premiums before they go into effect – and perhaps even more. 

“This is a gaping hole in our regulatory system, and it is unacceptable.  All consumers and small businesses are entitled to a rigorous and objective review of premiums to ensure that they are reasonable.  And if that review determines that premiums are unjustified – that insurance companies are just trying to run up profits – corrective action must be taken.

“Rate review authority is not a panacea for reducing health care costs.  We all know that premiums are rising because health care costs are rising.  That is why the reforms in the Affordable Care Act aimed at containing costs are so important.

“But according to the National Association for Insurance Commissioners – and I quote – “rate review can help keep insurers focused on constraining the growth of these costs” – end quote.  The NAIC has also stated that – and I again quote – “rate review authority is an important tool for regulators, and can help keep insurance companies honest” – end quote.  That is why, just this past Sunday, on the front page of the New York Times, there was an article about how New York’s insurance companies are vigorously fighting the Governor’s proposal to reinstate prior approval of premiums.

“I want to commend Senator Feinstein for her extraordinary leadership on this issue.  Her proposal became an important provision in President Obama’s health reform plan.  Unfortunately, because of procedural rules, it could not be included in the final health reform package.  But make no mistake: we are redoubling our efforts, and we are committed to ensuring that unjustified premiums are corrected in every state.”