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Health Insurance Companies Facing New Mandate
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New Mandate Proposes Greater Oversight for Insurance Companies
This week the Obama administration announced plans for a new mandate designed to question rate hikes on insurance coverage of over 10%. The mandate will go into effect in 2011, and health insurance companies will be expected to justify hikes for insurance premiums that appear excessive.
This comes in light of steep increases for premiums seen nationwide, some up to 30% or more. At the same time major health insurance companies have declared record profits for 2010, even as the rest of America struggles with unemployment and a sluggish economy.
The rate of 10% was chosen because it tends to reflect medical inflation. Health insurance companies whose premiums for health plans exceed this number would be required to explain their costs and justify increases in writing, and post it on the government's new website, healthcare.gov.
Supporters of the new mandate argue that it will give consumers back the right to question insurance companies and make informed decisions regarding their health care.
Opponents argue that the mandate doesn't take into account the different components required to set health premiums. The new healthcare bill has made it illegal for insurance companies to deny coverage to children with pre-existing conditions or to rescind coverage for sick people. This, along with new minimums of coverage, are what insurance companies say are driving up costs.
The mandate will not give the federal government the right to block premium hikes. Only states have the power to do so, and only in certain states where legislation has made it possible. The White House hopes that by forcing health insurance companies to justify their costs for health plans they will think twice about implementing hikes that are unnecessary or overblown.
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