Affordability is the number one barrier to consumers obtaining health care. The exorbitant premium increases we've seen across the country, like Blue Shield of California’s proposed rate hike of up to 59%, mean more and more consumers who can’t buy insurance at all, or can’t afford to use the insurance they’ve purchased.

At the same time, medical spending is actually slowing down. Weiss Ratings reported this month that there was a decrease in overall medical costs for health insurers last year for the first time in ten years. With medical costs falling for some insurers for the first time in a decade, every insurance company can’t continue to insist double-digit rate hikes are due to increasing medical costs.

In fact, every measure of medical inflation – from the Consumer Price Index (2.9%) to the S&P Healthcare Economic Index (6.1%) – was down last year as well. Still, most health insurers aren't slowing rate hikes, because most of them don’t have to justify the costs they’re passing on to consumers.

The only certain way to control skyrocketing health insurance rates is to give state insurance regulators the authority to reject excessive rates hikes before they take effect. California has a model prior approval rate regulation law called Proposition 103, but that law currently applies only to property insurance, not health care. AB 52 in the state legislature aims to fix that.

In the meantime, although the federal health reform law did not give regulators the authority to reduce or reject excessive rate hikes, it did require review and public disclosure of unreasonable increases. HHS is writing the rules now for how that oversight would work.

The whole point of requiring insurers to justify rate hikes is to make them open their books and prove they need every penny of an increase, so consumers can decide for themselves if health insurance companies are ripping them off.

This public disclosure is the only tool in the federal health reform law with the potential to keep double-digit rate increases in check. But that threat of public embarrassment is hollow unless rate review regulations require health insurers to justify rates publicly, not just behind closed doors.

Unfortunately, the current draft of the HHS regulations wouldn’t make enough information public to shame insurers into doing the right thing, and the regulations would limit the number of rate hikes that get reviewed at all.

Consumer Watchdog sent our comments on how to close the loopholes in the regulations to HHS yesterday. Here are the highlights:

• Rules must require all data about a rate hike to be publicly disclosed.
  • The proposed regulation would allow states to choose to limit, or even prohibit, disclosure of the data needed for consumers to determine if a rate is unreasonable.
• The public rate justification must contain comprehensive information about insurer spending, including:
  • Administrative expenses like lobbying, campaign contributions, and advertising
  • Transfers to affiliate and parent companies that can be used to hide profits
  • Sample rate calculations to show the how a rate increase affects individual policyholders
• More rate increases should be reviewed to determine if they are unreasonable.
  • The proposed regulation requires review of any increase of 10 percent or greater.
  • Any increase that exceeds 150% of the rate of medical inflation, or from an insurer that failed to meet the medical loss ratio rule, should also be reviewed.
• The rules should apply to all rate increases proposed or implemented since the federal reform law was enacted.
  • The regulation currently would not take effect until July 1, 2011, leaving unscrutinized the double-digit hikes imposed over the last year by insurers racing to beat stronger regulation.
• Consumers must have an official role in the rate review process.
• Any rate that is excessive, unjustified or unfairly discriminatory should be considered unreasonable.

Download our full comments here.