The Appropriations Committee passed a measure Wednesday that would require a public hearing before the Insurance Department allows an insurance company to increase its rates.

The measure passed with Republicans and fiscally conservative Democrats voicing concerns over its $2.3 million fiscal note and the fact the measure would add 7.5 full time positions to the Insurance Department. 

But proponents of the measure said neither the $2.3 million nor the additional employees would cost the state. The Insurance Department budget is paid for through an assessment on the state’s insurance companies.

Sen. Edith Prague, D-Columbia, explained the measure was in part a response to steep rate hikes approved last year by former Insurance Department Commissioner Thomas Sullivan. Sullivan later resigned following public outcry over the increases.

Prague said those rate hikes had a negative impact on seniors in the state who had had health care policies for years.

“Many of the seniors had to drop their long-term policies because of that huge increase. If we had had something like this they would at least have had a chance to make their views known,” she said.

But Rep. Linda Schofield, D-Simsbury, said the public will always oppose rate hikes. Insurance rates are arrived at through a complex actuarial formula, she said. It falls to the Insurance Department to balance two sometimes conflicting principles, she said. On one hand the department must serve as an advocate for consumers, but on the other they must ensure the industry remains solvent, she said.

If rates are kept artificially low to appease consumers, insurance companies could end up filing for bankruptcy and become unable to honor claims, Schofield said. That option does not do consumers any favors either, she said.

“You can’t force a company to sell something for a cheaper price than what it costs them to put that product together,” she said.

Public hearings may open insurance companies up to a “public thrashing” but that does not change the math that allows them to remain in business, she said.

In the past the hearings have drawn public outcry. Protesters disrupted a November hearing on rate increases proposed by Anthem Blue Cross Blue Shield. Those increases were later denied.

It was also pointed out that Insurance Department itself testified against the measure during a public hearing. Rep. Andy Fleischmann, D-West Hartford, said that the Attorney General’s office, the Health Care Advocate and the Consumer Advocate have all voiced support for the measure.

Fleischmann cited another set of increases for individual health care policies, which took place last fall. Those hikes ranged from 41 percent to 47 percent, he said.

“Imagine that, you’re a small business person or an individual getting your own insurance, there’s a premium hike proposed of 41 to 47 percent—no public hearing approved by the state health insurance department. It was outrageous then, it is still outrageous now and this bill would prevent that, help protect our constituents and our small business owners,” he said.

Schofield also had concerns about the “extraordinary subpoena powers” the measure would give to both the Attorney General and the Health Care Advocate. The measure gives both offices the opportunity to require the companies to produce books, vouchers, memorandums, letters, contracts and other documents, she said.

That extensive subpoena power could force companies to take enormous amounts of time and expenses whenever they apply for a rate increase, she said. The required hearings could add four to five months to the rate filing process, she said.

The Insurance Department has a history of approving rate increases, according to a 2009 Office of Legislative Research report.

Following the bills passage Prague said she was delighted by it’s success. The measure will now return to the Senate.