Bert Caldwell: Some price-gouging is downright unhealthy

Gasoline prices have doubled since May 2000. Consumers feel they are being gouged and want something done to curb the greedy oil companies and their record profits.

The industry defends itself by blaming high prices for crude oil, and the fragile balance of supply and demand caused by a lack of new refining capacity.

Congress holds hearings. Various state and federal agencies investigate. Wasteful energy policies remain in place.

Now, consider individual health insurance premiums in Washington.

Premiums, like gas prices, have doubled. The three top carriers have accumulated capital — their measure of profit — in excess of $2 billion.

The insurance companies attribute the increases to higher costs for everything from aspirin to Zetia.

The Legislature holds hearings. Does nothing. Days after the lawmakers adjourn, Regence Blue Shield and Asuris Northwest Health notify Washington Insurance Commissioner Mike Kreidler the company will hike rates for individual health policies an average 19 percent. For some of Regence’s 137,000 individual policy holders, mostly the more senior, the increase will be 40 percent.

Thanks to the Legislature’s inaction, he can do nothing.

Kreidler had submitted a bill that would have allowed him to review, and potentially limit, rate increases filed by health insurers. In the process, he could have taken into account reserves accumulated the last few years that are double the amount needed to cover three months of claims, an industry benchmark.

In just the first three months of 2007, Regence, Premera and Group Health Cooperative, by far the three largest providers in Washington, reported combined net income of more than $100 million.

Kreidler’s objective was hardly radical. Until 2000, the Insurance Commissioner’s Office had the power to reject or modify proposed premium increases. Deborah Senn, Kreidler’s predecessor, did just that. In 1997, 1998, and 1999, she trimmed them between 1 percent and 4 percent.

But Senn was accused of running health insurers out of the state, so the commissioner’s regulatory powers were rolled back. Competition from new players in the market was supposed to keep premiums under control. That was true only in 2006, when the average premium increase was less than 5 percent.

Perhaps that was the result of political calculations, not financial, by the insurance companies.

In a letter last week to Senate Majority Leader Lisa Brown, D-Spokane, and Speaker of the House Frank Chopp, D-Seattle, Kreidler says “The timing of Regence’s announcement strains credibility.

“Regence’s substantial rate hike was in development at the same time that carriers were vigorously opposing the bill.”

Kreidler’s proposal cleared the Senate by a 2-to-1 margin, but never got out of the House Rules Committee.”This was our biggest consumer measure,” says Stephanie Marquis, a spokeswoman for the Insurance Commissioner’s Office.

Regence’s surprise premium increase is just the sort of consumer abuse Kreidler hoped to stop, she says, adding that individuals have no leverage when buying insurance, as groups do, and cannot easily transfer coverage because they will have to undergo another physical in order to qualify for a new policy.

Marquis says Kreidler is also concerned about the potential for further rate increases when a mandate that mental health treatments be covered kicks in Jan. 1.

Regence President Mary McWilliams responded to Kreidler’s letter with one of her own that defends the timing and amount of its premium filing, reserves approaching $900 million, and the regulatory changes made in 2000.

In an interview, she said the “objective” loss ratios established in that legislation are better than the “subjective” criteria Kreidler might choose to apply if his oversight powers were restored. Regence payouts significantly exceed those set in 2000, she said.

The reserves are a “safety net” against losses a pandemic might cause, McWilliams adds.

Maybe. But consumers might want to ask lawmakers why they passed on an opportunity to reassert active oversight of insurance pricing. Had they done the same with gasoline pricing, the outcry would have been deafening.

After all, which product is the more important?

As for Kreidler, he’s moving on. Next legislative session, he tells Brown and Chopp, he will pursue “comprehensive health care reforms that serve the public and stop rewarding insurers for avoiding risk and gaming the system.”

That should pour some gasoline on the fire.