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The Center for Consumer Information & Insurance Oversight

 

New Resources to Help States Crack Down on Unreasonable Health Insurance Premium Hikes and to Enhance Health Pricing Transparency

Before the Affordable Care Act, insurance companies in many states increased health insurance premiums with little oversight, transparency, or public accountability. Only 26 states and the District of Columbia had the legal authority to reject a proposed increase that was excessive, lacked justification or otherwise exceeded state standards, and many states that had the authority to do this lacked resources to exercise it meaningfully. This lack of authority and resources for states created an uneven playing field for consumers and contributed to unjustified premium increases in some states.

Examples of insurance premium hikes reviewed by states during this time, based on public reports, include:

  • In New Mexico, Blue Cross Blue Shield proposed to raise health insurance premiums by an average of 21% on some of its members in the individual market for 2010.
  • In Michigan, in 2009, Blue Cross/Blue Shield of Michigan requested approval for premium increases of 56% for plans sold on the individual market.
  • In Oregon, Regency Blue Cross Blue Shield requested a 20% premium increase for 2009.
  • In Rhode Island, UnitedHealth, Tufts, and Blue Cross requested 13 to 16% rate increases for 2009.
  • In Washington, in 2007, health insurance premiums for some individual health plans increased by up to 40% until the state imposed stiffer premium regulation in 2008.

The Affordable Care Act provides states with $250 million in Health Insurance Premium Review Grants over five years to help create a more level playing field by improving how states review proposed health insurance premium increases and holding insurance companies accountable for unjustified premium increases.

In addition, the Health Insurance Premium Review Grants also provide funding to establish Data Centers that enhance health pricing transparency. Data Centers help the public to better understand the comparative price of procedures in a given region or for a specific hospital, insurer, or provider. Businesses and consumers alike can use this data to drive decision-making and reward cost-effective provision of care. In addition, medical claims data can be used to better understand cost drivers, evaluate quality improvement initiatives, and better understand utilization of services.

On August 16, 2010 the Department of Health and Human Services announced the award of $46 million to states in the first round of these grants, known as Cycle I. Rate review grants were subsequently made available to territories on September 1, 2010 and were awarded on March 29, 2011. On September 20, 2011, HHS announced a second round of awards -- referred to as Cycle II -- totaling $109 million to be used by states for up to three years. On September 21, 2012, HHS awarded Phase II of Cycle II totaling $8 million to states and territories to be used for two years On March 15, 2013, HHS awarded Phase III of Cycle II, awarding a total of $2 million to states to be used for two years. On March 15, 2013, HHS awarded Phase III of Cycle II, awarding a total of $2 million to states to be used for two years. On September 23, 2013, HHS awarded $67 million to 20 states and one territory to be used for two years.  These grant funds are helping states improve their reviews of proposed health insurance premium increases, take action against insurers seeking unreasonable rate hikes, and ensure consumers receive value for their premium dollars.

 

What This Means for You

 

All across America, some consumers and employers were confronted with large, double-digit health insurance premium hikes. The proposals from the states and territories overwhelmingly demonstrated the need, and desire, for new resources and tools to hold insurance companies accountable.

Previously, the authority to prevent unreasonable premium increases varied considerably across states and across markets. Before the Affordable Care Act, only 26 states and the District of Columbia had the authority to reject a proposed increase that was excessive, lacked justification or otherwise exceeded state standards. Experience showed that, in these states, proposed health insurance premium increases could be moderated. For example:

  • On August 6, 2010, Blue Cross Blue Shield of Massachusetts agreed to a significant reduction of proposed increases less than 13% instead of the nearly 23% they initially requested.
  • In 2010, Oregon disapproved health insurance premium requests of 10%, 18% and 20% in the individual market.
  • In February of 2010, Anthem Blue Cross of California requested a 39% increase in health insurance premiums in the individual market. After Secretary Sebelius and state officials asked for a public justification for these increases, Anthem Blue Cross delayed raising its rates for two months. After additional scrutiny, an independent audit discovered errors in Anthem's calculations resulting in Anthem withdrawing its request, further proving that more scrutiny of health insurance premiums is needed.

These grants are providing states with the resources they need to perform this type of review.

 

Helping States Hold Health Insurers Accountable

 

States are using this funding in a variety of ways.

  • Pursue Additional Authorities: States are seeking authority to create a more robust program to review rates or to require advanced approval of proposed health insurance premium increases to ensure that they are justified.
  • Expand the Scope of Health Insurance Premium Review: Many states are expanding the scope of their current health insurance review, for example by reviewing and requiring pre-approval of rate increases for additional health insurance products in their state.
  • Improve the Health Insurance Premium Review Process: All grantees are requiring insurance companies to report more extensive information through a new, standardized process to better evaluate proposed premium increases and increase transparency across the marketplace.
  • Make More Information Publicly Available: States are using funds to increase the transparency of the health insurance premium review process and provide easy to understand, consumer friendly information to the public about changes to their premiums.
  • Develop and Upgrade Technology: State grantees are developing and upgrading existing technology to streamline data sharing and put information in the hands of consumers more quickly.

Helping States to Expand Transparency in Health Pricing

States that choose to establish Data Centers or perform other health pricing transparency activities are using grant funds to:

  • Develop pricing schedules that reflect market rates: State grantees are developing pricing schedules and other database tools that fairly and accurately reflect market rates for medical services and the geographic differences in those rates.  Grant funds help states to use the best available statistical methods and data processing technology when develop pricing schedules and other database tools. In addition, grant funds help states to regularly update pricing schedules to reflect changes in charges for medical services
  • Make health pricing information publicly available:  Grant funds help states to make health care cost information readily available to the public through websites that allow consumers to understand the amounts that health care providers in their area charge for particular medical services. In addition, grant funds help states to regularly publish information on the statistical methodologies used by the center to analyze medical claims. Grant funds also help Data Centers to make pricing data available to researchers and policy makers, while implementing rigorous data security and privacy protections.

A map summarizing how each state will use the new resources can be found here.

Builds on Other Affordable Care Act Policies to Make Health Care Affordable

 

These grants build on the Obama Administration's work with states to implement the Affordable Care Act. Beginning September 1, 2011, the health care law implemented federal rate review standards. These rules ensure that, in every state and territory, insurance companies are required to publicly submit for review and justify their actions - Opens in a new window if they want to raise rates by 10% or more. Other statutory provisions designed to improve affordability include:

The Affordable Care Act includes a wide variety of provisions designed to promote a high-quality, high-value, health care system for all Americans and to make the health insurance market more consumer-friendly and transparent.