Health insurers worry about sunshine

By Jerry Burris
Advertiser Editorial Editor

You know the joke about everyone's worst nightmare: You answer a knock on the door to find a smiling man who says "Hi, we're from the government and we're here to help you."

Actually, for some people, the worst nightmare is not the government man but the guy who says "Hi, I'm from the insurance company, and I'm here to help you."

Suspicion about motives and the depth of sincerity runs deep for both the government and for insurance companies. They are among the many institutions (OK, throw the media in here, too) we all love to hate.

So it is fascinating that these two institutions are at each other's throats this year in the Legislature over what may turn out to be the sleeper issue of the session: rate "regulation" for health insurance providers.

In this corner is Insurance Commissioner Wayne Metcalf and his army of actuaries, accountants and examiners. In the other are health insurance giants HMSA and Kaiser, who between them pretty much control the entire Hawai'i health insurance market.

Metcalf wants "sunshine" on the rate-making procedures used by these two. Today, he says, the assumptions and statistics that go into setting the rates that we all pay for medical insurance are more closely guarded than the formula for Coca-Cola.

All he wants, Metcalf insists, is information. He wants to know what HMSA and Kaiser use to set their rates so he and the public can determine whether they are excessive, inadequate or unfairly discriminatory.

The insurance companies see this differently. They don't see sunshine, they see storm clouds of rate regulation — rate capping, in fact — that would put government bureaucrats in "control" of healthcare costs.

Each side coats its rhetoric in careful and modulated words. But it is apparent that the two sides do not trust each other.

The health insurers paint a picture of government officials trying to "control" healthcare costs by squeezing rates, which they say is nonsensical. Healthcare costs, they say, are driven by such external factors as drug prices, an aging population and patient demand for more services. In other words, the rates are a product of costs and demand, not some arbitrary decision by the insurance company.

That all may be so, say Metcalf and his team, but let's open the books so we can see for ourselves. Is that all that goes into rate-making, or are there other undisclosed assumptions (say executive compensation or offsets to take care of for-profit subsidiaries) that get into the mix?

While public focus has been on whether rates might be unnecessarily high, the regulators seem almost as interested in whether they are too low. In other words, are rates kept to a point where potential for-profit competitors see little reason to enter the market?

In the end, this may turn out to be a conversation about competition rather than rates and prices. It's a conversation legislators will be forced to moderate, since the two sides simply don't trust each other.