The two steps forward, one step back approach Louisiana policy-makers have taken towards insurance reform seems unlikely to make much positive impact, because they keep coming up short in addressing the most prominent impediments to reducing premiums.

Insurance reform has been the topic of this year’s legislative session. While some effort has been made on immovable structure insurance, most and most attention has gone towards vehicle insurance. Indeed, with pomp and circumstance last week, Republican Gov. Jeff Landry signed several bills on the subject that he had supported–although a few more that he does not languish in the legislative pipeline.

The most controversial was HB 148 by GOP state Rep. Jeff Wiley, which actually started out differently. That bill gives the insurance commissioner, at present Republican Tim Temple, the power to set rates–potentially on any basis even arbitrary-filed by insurers regardless of how competitive is the market; until then, the commissioner could review a requested increase for noncompetitive noncommercial lines for an “excessive” increase, but not those that were deemed competitive, with competitiveness now not a factor for the criterion of being “excessive.”

In essence, the bill strengthens the state’s status as one of a baker’s dozen of “prior approval” states, or ones where the regulator approves a rate change prior to use, as opposed to other forms where no approval is needed with varying chronological requirements for filing notice of an increase, if any. The theory behind not requiring prior approval is that it discourages competition that would bring down rates.

Louisiana has been down this road before. For six decades, until 2008, the state had a gubernatorially-appointed Insurance Rating Commission with rate-setting powers now very similar to those just granted to the commissioner. Reasons for its abolishment exactly were that it discouraged competition and politicized rate-setting.

Conversely, the selling point for prior approval states is that they disproportionately have had the least average increase in rates over the 1989-2015 period, a weighted change of 45 percent. But Louisiana has been a striking outlier, with rates increasing 115.4 percent over that period, the fifth-most of any, so it would seem that approach hasn’t worked.

A knock against prior approval is that it unduly inhibits profitability of insurers, creating less competitive conditions that can leave the Hobson’s choice of higher rates or nobody writing policies. However, the data show among categories the prior approval states in the main are only a little less profitable for writers – except Louisiana, which is the least profitable among the states (and with only another prior approval state, Nevada, close to it).

Thus, the regulatory structure now strengthened has produced the least incentive for competition that can put a cap on rates while not dampening rate increases. That should tell policy-makers that making that structure even more severe – in that with the arbitrariness of rate approvals now more realistic this will discourage competition, a point Temple emphasized in his opposition to HB 148 – is less likely than ever to prevent rates from spiraling upwards. Instead, the real source of inflated Louisiana rates must come from another locus, which many have identified as a legal environment that encourages litigation and inflates payouts, which then gets translated into higher premiums.

Other bills Landry signed do attempt to better align payouts—whether through the courts or otherwise—with actual harm and liability. However, additional methods that could further this goal remain unused in bills he generally opposes. Problematically, though, HB 148—now Act 11—threatens to undermine those reforms, as both history and data suggest. While many exogenous factors influence rates, particularly weather, the passage of Act 11 offers little reason to believe rates will drop significantly, even in the intermediate future.