Tuesday, August 12, 2008

Justifying Your Existence

If you are elected (or appointed) to public office, how do you justify your existence?

By declaring your job is to help protect the little people from insurance carriers.

Eric Dinallo was appointed as commissioner to the NY Department of Insurance to replace Eliot Spitzer of "client number 9" fame.

Last week, he responded to a request for a rate increase from the state's largest auto insurer, GEICO, with a demand that it show the impact of higher gas prices and reduced travel on claims.

Interesting challenge.

So what did GEICO do?

They withdrew their request for a rate hike rather than go through the hassle of sorting claim data.

So is this a victory for the DOI?

Not necessarily.

Carriers will either be allowed to charge an adequate premium to cover their losses and provide a profit or they will withdraw from writing business in the state. This has been proven many times over.

The result is, fewer carriers to spread the risk and a resulting higher rate.

If carriers (like GEICO) operated in a vacuum they could charge anything they wanted and the consumer would have to pay it. But GEICO is just one of many carriers. The fact they are the largest in NY is probably attributable to having competitive rates.

So if they want to maintain market share they must remain competitive . . . even with a rate increase.

But it's not enough for health insurers to roll out double-digit premium increases every year and blame the usual suspects — drug companies, spendthrift providers — without providing the kind of real-time detail that Dinallo is asking from the auto insurers. Break down the cost factors. Explain administrative costs, including salary increases. And lay it all out in public before the premium bad news is delivered.

With this kind of idiocy, I can see health insurance carriers simply withdrawing from the state. The regulatory environment there is already prohibitive resulting in exceptionally higher premiums to cover state mandates such as community rating and guaranteed issue.

It is amazing what elected (and appointed) officials will do to prove they are worthy.

Too bad the public isn't informed enough to throw them out of office.
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