A new law that will expand the authority of the Pennsylvania Department of Insurance has taken effect this week. The law was introduced last year and won approval from the state’s legislators. Governor Tom Corbett signed the bill, Act 134, into law late last year, with an enactment date of March 21, 2012. The law is nearly identical to similar legislation in California that gave regulators more authority over rate proposals coming from insurance companies. Legislators believe that new authority granted to the Department of Insurance will help protect consumers from costly insurance rate hikes.
The law enables regulators to review rate proposals coming from insurance companies of 10% or higher. Regulators will now be able to determine whether rate increases are necessary and could force insurers to make changes to their proposals if rates are deemed excessive. The new authority given to regulators only concerns the small group health insurance market, however, with the remainder of the state’s health insurance industry continuing as it has for the past several years.
Insurance Commissioner Mike Consedine believes that the new law allows regulators to regain control of the small group market and help protect consumers from opportunistic insurers. Like similar laws in other states, it has struck a nerve amongst health insurance companies who claim that higher rates are necessary to keep up with the pace of medical service inflation. Insurers claim that the cost of medical care is largely unregulated, leaving it open to abuses in pricing. In an effort to make up for losses relating to inflated costs in medical service, insurers often seek to raise rates on coverage.