Insurers gone wild

With the affordability of potentially lifesaving medical care at stake, officials in Pennsylvania and New Jersey are taking the right step in focusing renewed scrutiny on health insurers’ exorbitant rate hikes and lavish spending on company executives.

Since health insurers across the nation are in line to sign up 32 million more Americans under the federal expansion of health insurance coverage, there should be more than enough new business to fatten their bottom lines.

BRAD C BOWER / Associated Press

But Gov. Rendell earlier this month ordered state Insurance Commissioner Joel Ario to probe the nine large health insurers over hefty rate hikes. “This is about companies trying to get the highest possible rates before the federal reforms take effect,” the governor charged.

A study by Ario’s department has turned up evidence that insurers may indeed be trying to pad revenues with rate hikes prior to the enactment of Obamacare, Rendell said. Ario’s data shows that some insurers are setting higher rates for people who are prone to illness, even though that practice will be banned when federal reform takes hold in 2014.

While so-called medical underwriting remains legal, insurers who practice it aren’t exactly acting in the spirit of the national health reform. It’s the equivalent of getting one bite of the apple at customers’ expense, and at a time of economic distress for individuals and small businesses whose insurance rates are highest.

At the very least, Ario’s inquiry should convince insurers to back off on such practices out of a sense of good public relations.

In New Jersey, state lawmakers on Monday were justly outraged by disclosures that the state’s largest insurer, Horizon Blue Cross Blue Shield, had hiked premiums and laid off 200 people last year while also paying $31 million in employee bonuses. A onetime payment to CEO William J. Marino boosted his salary to more than $8.7 million — a 59 percent increase from the previous year.

Marino has been credited with turning around the once financially troubled insurer, but the decision by the company to bump his pay and hand out so many bonuses during tough economic times simply looks bad. If Trenton lawmakers move ahead to impose pay restrictions on the insurer, Marino and other Horizon officials will have no one to blame but themselves.

One of the promises of federal health-care reform is that it will help bring galloping medical costs under control. Insurers are expected to play a major role in that effort. So they need to start now by showing more restraint in hiking rates and by controlling their own costs.