Just when consumers are finally getting a look at how health insurance companies conduct their business, the industry is racing to shut and lock the door. Buried deep in a “model law” for states to update health insurance regulation is a clause that would keep secret the companies’ justification for  exorbitant rate increases.

Why’s this so bad? Because one of the few ways patients and consumer groups can tell whether a rate increase is justified is to closely examine the data-heavy actuarial reports that insurers use as their defense. In states with consumer-friendly insurance commissioners, some have found gross math errors in favor of the companies. (Simple mistakes? Maybe.) Without access to actuarial and other related data, consumers can’t even hold an unfriendly insurance regulator to account, much less force the company to back down.

The “model law” is being drafted by the National Association of Insurance Commissioners, a private body of state insurance commissioners. It has long been criticized for being too cozy with the industry. The NAIC, however, has also drafted a lot of the regulations governing health insurance reform nationally, with the explicit approval of the Department of Health and Human Services. So what the NAIC says and does matters to every insurance policyholder.

Here’s the industry-friendly secrecy clause tucked into the NAIC’s model law, which most states would closely follow in drafting their own laws:

Each health carrier shall file with the commissioner annually on or before March 15, an actuarial certification certifying that the carrier is in compliance with this Act and that the rating methods of the carrier are actuarially sound. The certification shall be in a form and manner, and shall contain such information, as specified by the commissioner. A copy of the certification shall be retained by the carrier at its principal place of business.

(3) (a) A health carrier shall make the information and documentation described in paragraph (1) available to the commissioner upon request.

b) Except in cases of violations of this Act, the information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the commissioner to persons outside of the Department of Insurance except as agreed to by the health carrier or as ordered by a court of competent jurisdiction.

There is a lot of room for mischief in an actuarial certification, especially when the actuarial company depends on the insurance company for its pay. The insurance industry primarily uses the certifications as a shield against state oversight, especially any attempt to lower rates.

Under this clause, a state insurance commissioner could have trouble even telling the public why an insurance rate is unjustified,  turning protective oversight  into a he said-she said catfight. Given tens of millions in lobbying money employed on the insurance industry side, it wouldn’t be an even battle Consumers couldn’t fight back against rates without data to back their argument.

If the secrecy clause stays in, states that already make such data public. like California, will find their legislatures swarming with insurance lobbyists pushing to put the data back in a closet, because the NAIC model law says to do it. The insurance lobby has repeatedly blocked state authority to deny or modify rate increases, so for a $35-million annual lobby, a little secrecy looks easy.

There is almost no such thing as a “trade secret” in a service industry like insurance. The companies don’t need to keep their actuarial reports secret from other insurers–they just need to keep the data away from outraged consumers.

The NAIC’s own consumer representatives oppose the industry secrecy clause. We hope the Department of Health and Human Services, which has strongly favored disclosure and transparency, will also weigh in. Otherwise, it will be up to the states to understand that this clause is a model of nothing except the lobbying might of the health insurance industry.

Consumers who’d like to fight back, at least in California, can start by learning more about the Consumer Watchdog Campaign’s November ballot initiative. It would make insurance companies justify their rates before they go into effect, and reduce or retract rates if they’re unjustified.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

( – promoted by Robert Cruickshank)

A lot of things may have changed in light of the Massachusetts special election upset Tuesday, but one thing that hasn’t changed is the health insurance crisis in America. We must address this crisis.

 Health care costs are unsustainable; they’re still crushing families, small businesses and large companies. When people lose their jobs they lose their health insurance. People with jobs and who want coverage but find out they have a pre-existing condition still can’t get coverage. Businesses large and small come before Congress every day and tell us how they’re going to have to drop coverage for their employees or go out of business.

All of these problems remain, and so does our need to address them.

President Obama and a majority in both the House and Senate remain committed to enacting fiscally responsible health insurance reform that provides greater affordability, accessibility and accountability to American families and businesses. With the loss of the 60th vote in the Senate last Tuesday, we are exploring the means by which we can enact needed reform, but we are not backing away from our commitment to a responsible and balanced bill.

The election result in Massachusetts in part reflected the tremendous fear and frustration Americans understandably feel as the impacts of the worst recession in generations continue. Americans desperately want and need to see new jobs created, small businesses need help, our financial system requires new accountability, and we must reduce the budget deficit.

Despite stagnation in the Senate caused by the relentless and undemocratic opposition of the Republican minority, this Congress has been focused on jobs and the economy. In addition to the successful and critical American Recovery Act passed last year that is delivering millions of dollars to our community to create jobs, the House passed a second jobs bill just before Christmas that I helped to write to help save the jobs of teachers, firefighters, law enforcement officers and to put people back to work rebuilding our infrastructure. The Senate could not take up our bill because of Republican filibustering. We will continue to fight for new jobs and investments in our country.

But the economy and health reform are connected, and we can and must focus on both at the same time. Reforming health insurance laws is key to whether employers will hire or not. Reports show that reforming health insurance will create millions of jobs over the next decade and will help us reduce the deficit by billions of dollars.

Tragically, Republicans in Washington decided to become the ‘Party of No’. They announced early last year that they would do everything in their power to stop President Obama from enacting health insurance reform in the hopes of weakening the President’s standing. Senator-elect Scott Brown from Massachusetts has said “no” to health reform, even though Massachusetts is the only state in this country with affordable health care for all – a law that Sen. Brown supported. Their reform is similar to what we are trying to provide for all Americans, and it is overwhelmingly popular.

But saying “no” is not a solution for America. Saying “no” doesn’t help one worker keep his or her health insurance. Saying “no” doesn’t stop insurance companies from denying children coverage because of pre-existing conditions. Saying “no” doesn’t cure the health care problems that economists and business leaders agree are dragging our nation’s economy down and hurting our international competitiveness.

We recognize that voters in Massachusetts, like millions of other Americans, are upset about the economy and about parts of the health reform bill and special privileges that the Senate put in their bill for Nebraska, for example, and others. Those privileges have no place in this effort and should be removed from a final bill.

The path to reform has been made more difficult by Tuesday’s election, but the need for reform has become no less urgent.

What the House has been fighting for, and what we will continue to fight for, are key reforms to deliver quality, affordable health care for the American people that offer security for families and businesses across the country.

Also crossposted at Chairman Miller's personal blog.