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Health care reform requires health insurance coverage, but at what price?

The new health care reform law requires that all Americans have health insurance by 2014 (with only limited exceptions). You can buy group coverage through your employer,  purchase an individual policy or attain coverage through one of the state health insurance exchanges that will be available.

But how much will you have to pay?

health care reformConsidering health insurance premiums have doubled on average over the last 10 years, according to the U.S. Department of Health and Human Services (HHS), that's a big question.

"If we're going to demand people buy health insurance, then we must provide them with the proper consumer protections," says Judy Dugan, research director of Consumer Watchdog, which is among groups that want more teeth in the health care reform laws  to regulate rates.

The Patient Protection and Affordable Care Act passed by Congress in March gives states the authority to oversee health insurance, but insurers must submit to the HHS Secretary and the relevant state "a justification for an unreasonable premium increase prior to the implementation of the increase." The law calls for the HHS Secretary and the states to "establish a process for the annual review, beginning with the 2010 plan year."

It remains unclear what states may deem as “unreasonable” or how they will make that determination.

Health insurance rate regulation varies

Today the authority of states to reject outrageous premium hikes is a patchwork of rules. Only 26 states and the District of Columbia can legally reject a proposed health insurance increase that they determine is excessive, lacks justification or exceeds state standards, but many that have the authority don't have the resources to exercise it, according to the U.S. Department of Health and Human Services.

"This lack of authority and resources for states has created an uneven playing field for consumers and contributed to unjustified premium increases," the department said in a fact sheet.

To help level the playing field, roughly $250 million in federal grants will be awarded to states over five years to beef up their authority, improve the rate-review process, make more information available to the public and upgrade technology. President Obama announced the award of $46 million to 45 states and the District of Columbia in the first round of grants in August.

"It's a help," says North Carolina Insurance Commissioner Wayne Goodwin. "It won't solve all our workload concerns, but the federal grants and other available monies do help us with that initial jump-start."

The North Carolina Department of Insurance, which received a $1 million federal grant, is seeking additional authority from the state legislature to review rates for small and large employer group and association health plans. The department already has the ability to approve or deny rates for individual health insurance plans.

"We determined we wanted to pursue this additional oversight in prior rate approval even without the federal health reform law," Goodwin says. "It will help us do our jobs better in protecting consumers and regulating the health insurance market."

His department will also use the grant to make rate filings posted on its Web site easier for consumers to read, seek authority from the North Carolina General Assembly to require insurers to create consumer-friendly summaries and require increased public information for rate filings.

Goodwin says that one effort gaining steam is the development of model laws by the National Association of Insurance Commissioners regarding health insurance rate regulation. The model laws could lead to more uniformity among states, but it’s up to states to adopt the laws.

"The North Carolina Department of Insurance and the legislature know North Carolina better than other states and certainly better than the federal government," he says.

The fight over health insurance rates

Still, if health insurance companies don’t like the rules in one state, what stops them from simply leaving a state? Dugan says insurance companies will lobby hard in states to prevent tougher regulation.

An insurance rate reform bill supported by consumer and labor organizations recently failed in California. The bill would have required approval from state regulators before health insurance companies could raise rates. But under pressure from the insurance industry, instead the legislature passed a bill allowing health insurance companies to increase rates as long as they were "actuarially sound."

"If you want to summarize what happened in Sacramento last night, you could say: Insurance companies won and Californians lost," said Consumer Watchdog's Executive Director Doug Heller in a press statement the day after the bill was passed.

If states can’t find a way to regulate their own health insurance prices, maybe the federal government will. On the national level, Sen. Dianne Feinstein (D-Calif.) introduced a bill that would give the U.S. Department of Health and Human Services the authority to deny or modify -- not just review -- unreasonable rate increases. The bill is under consideration by the Senate Committee on Health, Education, Labor, and Pensions.

In the meantime, the Affordable Care Act doesn't define "unreasonable." Whether you'll be able to find affordable health insurance will depend a lot on how the U.S. Department of Health and Human Services spells out that definition and how well your state is prepared to regulate the health insurance industry by 2014.

More from Barbara Marquand here

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