As public furor over increased health insurance premiums boils over across the nation, a bill that would require greater regulation and transparency in the rate setting process received a public hearing at Connecticut’s Capitol Thursday.

The bill proposed by the state Healthcare Advocate Kevin Lembo and Attorney General Richard Blumenthal was inspired by Anthem’s proposed 22 to 30 percent rate request last summer . After Lembo and Blumenthal intervened in that matter, Anthem received 13 to 20 percent increases for its 56,000 policyholders.

The Connecticut bill would require the Insurance Department to hold public hearings for all rate requests and allow consumer advocates, like Lembo and Blumenthal, to appeal the final decision in court. It would also require the department to approve, deny or modify the request, and require it to mandate rates that are “reasonable” for consumers.

“There is no justification for many of these rate increases,” Blumenthal said Thursday at a press conference prior to the public hearing. “At the root of these spiraling rates, on average last year of 20 percent, is a regulatory system that is virtually broken and dysfunctional.“

With this bill the burden of proving the need for a rate increase will fall on the insurance companies, Blumenthal said.

Sen. Ed Meyer, a Democrat from Guilford, said a recent report found that the Insurance Department approved 19 out of 23 rate increases.

“We need dramatic change,” Meyer said. “ I have no confidence in the governor or the General Assembly to make these changes.”

Lembo likened the change in regulatory structure to that of the utility markets where regulators have to approve rate increases before they’re passed along to consumers.

It should come as no surprise that the insurance industry and the state Insurance Department oppose the bill.

David Fusco, president of Anthem Blue Cross and Blue Shield of Connecticut, agreed to testify on the bill, even though he refused to answer some questions posed by lawmakers because he didn’t want to “politicize” the process. He didn’t want to talk about market share and refused to comment on remarks made by Anthem’s CEO to Congress.

He said the health insurance rates have increased over time to reflect the rising medical costs and services provided to its customers. He said he thinks the current process works well and gives the Insurance Commissioner broad discretion.

“The current regulatory framework provides for a thorough rate approval process that is time tested, and it should not be eviscerated simply because a prevailing political climate asserts that the approval of actuarially sound increases should be obstructed because they are higher than expected,” Fusco said in his written testimony.

In an interview following the press conference Thursday Insurance Commissioner Thomas Sullivan said he’s in favor of greater transparency, however, he doesn’t want to insert any subjective terms into the rate setting process. He said the rate review is done based on actuarial science and should not be manipulated in any way.

“I am confined to the facts and the facts are what guide me,” Sullivan said. “If Connecticut passed this legislation it would be the first in the nation to insert subjectivity…and this is not an area where you want to experiment.”

Proponents of the bill said they were open to discussions on the rate setting process, but Lembo warned that some of the criteria they are suggesting is not all that subjective. For example, in Rhode Island where the average increase was six percent it uses the consumer price index when considering rate increases.

He said Rhode Island with only 1 million people gained an insurance company last year.

“It’s not a market if it’s not open and not fully functioning,” Lembo said.

But Fusco and Sullivan said changing the rate setting process will force companies to leave the state.

“I believe there is a significant risk, after enactment, which will lead to a reduction in the number of health insurers writing individual health insurance in Connecticut,” Sullivan said. Currently there are eight companies writing individual major medical policies in the state.

Lembo said he’s optimistic something can be worked out.

Click here for our previous report on the legislation.