Health Care Law Under the Microscope: Can It Solve States' Health Crisis?

Jan. 13, 2011— -- As lawmakers in Washington revive the debate over whether to repeal the health care law, Americans -- burdened by rising insurance premiums and cost cuts in Medicaid -- are wondering whether the new law can ease the pain many consumers are feeling physically and financially.

In Arizona, the death of two Medicaid recipients who were denied organ transplants has triggered a national backlash, but the state is warning of further cuts to come.

From California to Iowa, insurers are hiking premiums, despite new regulations calling for more transparency on rate changes and billions of dollars being funneled to states to improve their rate review processes.

States blame dismal budgets for the Medicaid crisis, while insurers say years of rising costs -- not the health care law -- are translating into rate hikes.

The financial pressures on both the public and private sectors come as billions of dollars are being poured into states to aid with Medicaid expansion and rate reviews. It's money that administration officials say will help boost the U.S. health care system in the long term. But thus far, it has had little impact on the impending crisis for consumers.

The Obama administration has awarded $46 million to 45 states to help them develop and strengthen their rate oversight processes, and it will award another $200 million in coming months. California received $1 million of that federal money.

However, only 26 states and the District of Columbia -- not including California -- have the legal ability to reject rate increases they consider "unreasonable." So while California may be strengthening its rate review process, insurers can still go ahead and impose massive rate hikes at will.

Read more about new health care provisions and how they will affect you.

Health and Human Services also implemented a separate rule whereby all insurers that have proposed a rate increase of more than 10 percent will be required, starting July 1, to justify the hikes publicly, and those insurance companies that have a history of unreasonable increases will not be allowed to participate in insurance exchanges -- a marketplace where individuals and small businesses can shop for coverage -- starting in 2014.

The new rules, supporters say, are designed to make the system more transparent, but at the end of day, the decision on how much to increase rates lies with the insurer.