The Affordable Care Act brings an unprecedented level of scrutiny and transparency to health insurance rate increases. In every state, every proposed increase of ten percent or more will be evaluated by experts to assess whether it is based on reasonable cost assumptions and solid evidence. The review and scrutiny is expected to prevent unjustified premium hikes by insurance companies and to help provide those who buy insurance with greater value for their premium dollar. Additionally, consumers will benefit from greater transparency as they will be able to access online easy-to-understand information about why insurers are seeking the increases. These protections allow consumers to know that the rates they are paying are justified. And we know rate review works:
- In July 2011, Oregon recently forced an insurer to lower its request for a rate hike by nearly 10%. This put money back in the pockets of approximately 60,000 consumers.
- Over the past year, at the direction of the State Insurance Commissioner, Arkansas has been negotiating with insurance companies requesting rate increases greater than 10% on their individual health insurance products. The Commissioner recently negotiated a lower rate affecting approximately 90,000 policyholders.
- Last year, thanks to new rate review authority, North Carolina saved beneficiaries $14.5 million by reducing a rate increase request from the state’s largest insurance company.
To help states strengthen and improve their rate review processes, the Affordable Care Act provides states with $250 million in Health Insurance Rate Review Grants. These grants give states much needed resources to build on their historical primary role of reviewing proposed health insurance premium increases and to hold insurance companies accountable for unjustified premium increases.
On September 20, 2011 Health and Human Services (HHS) Secretary Kathleen Sebelius announced a second round of rate review grant awards, totaling $109 million to 28 states and the District of Columbia. These grants build on the $48 million that have been awarded to 42 states, the District of Columbia and five territories since the passage of the Affordable Care Act. In May 2011, the Secretary issued a final regulation to implement the rate review provisions added by the Affordable Care Act, requiring insurance companies to publicly justify unreasonable premium rate increases. This funding also provides additional resources to states as they implement the rate review final rule, requiring insurance companies to publicly justify unreasonable premium rate increases.
States have proposed to use this funding in a variety of ways in their grant proposals.
Introduce legislation: 7 states are introducing legislation to strengthen their authority to review and/or publicize proposed rate increases.
Expand scope of rate review: 19 states and the District of Columbia are proposing to use grant funds to expand the scope of rate review, for example, by reviewing rates in new markets or by reviewing rates for new products.
Improve rate filing requirements: All 28 states and the District of Columbia are proposing to use grant funding to bolster the information collected from insurers when a rate increase is filed, such as requiring insurers to provide additional information on administrative costs and requiring insurers to file rate increases in a standardized format.
Improve transparency and consumer interfaces: All 28 states and the District of Columbia are proposing to use grant funds to improve consumer interfaces such as developing a Rate Review Home Page at the Department of Insurance Website and providing opportunities for consumers to comment on proposed rate hikes via the website.
Hire new staff: 23 states and the District of Columbia are proposing to hire new staff during Cycle II.
Improve IT: 27 states and the District of Columbia are proposing to use grant funds to enhance IT capacity through the development of new or improved rate reporting systems designed to collect more robust rate data and allow for advanced analysis of rate filings.
A summary of how each state will use the new resources can be found in the Rate Review Works report. (PDF – 325 KB)
These grants build on state efforts to review unreasonable premium increases. Over the last year, 42 states, the District of Columbia, and the five U.S. territories have used $48 million in grants to help them improve their oversight of proposed health insurance rate increases. States have used this funding to significantly strengthen and improve their rate review processes:
- 9 states passed legislation to further enhance rate review
- 29 states and the District of Columbia have hired new staff to review rates
- 37 states and the District of Columbia have enhanced IT capacity to review rates more efficiently
- 39 states and the District of Columbia have enhanced consumer protections
Other significant state achievements with these rate review grants can be found in the report as well. (PDF – 325 KB)
Rate review builds on other provisions in the Affordable Care Act to help make health insurance more affordable for individuals, families, and businesses. Other steps the law takes to help make insurance more affordable include:
- Insurers are generally required to meet a medical loss ratio standard to spend at least 80% of premium dollars on health care and quality-improvement activities as opposed to overhead, advertising and CEO bonuses. Insurers that fail to meet that standard must either reduce premiums or pay rebates to consumers and employers;
- Small businesses are eligible for Federal tax credits of up to 35% of the cost of coverage for their workers. That amount rises to 50% by 2014; and
- In 2014, the Affordable Insurance Exchanges will use competition and transparency, including information on excessive or unjustified premium increases, to help make insurance more affordable.
The Affordable Care Act includes a variety of provisions designed to promote accountability, affordability, quality, and accessibility in the health care system for all Americans, and to make the health insurance market more consumer-friendly and transparent. Some of the provisions are already in effect, including prohibitions on pre-existing condition exclusions for children; prohibitions on lifetime dollar limits in all health plans; extended access to insurance for many young adults; and an unprecedented level of transparency about health insurance through www.HealthCare.gov.
Posted on: September 20, 2011