So all those headlines about how the Affordable Care Act’s insurance rate reviews are keeping premium hikes more reasonable and saving consumers?
It’s true. Up to a point.
Marketwatch’s Jen Wieczner took a look at how state laws vary – meaning rate review goes from having teeth in some places to barely having gums in others:
To keep prices in check, the health reform law instituted a procedure known as rate review, by which state insurance departments evaluate carriers’ proposed premium hikes of 10% or more to determine whether they are justified. But even when they deem the proposed increases excessive or unreasonable, insurance commissioners can’t always stop companies from putting them into effect.
HHS recently announced that rate review saved consumers $1 billion in rate hikes. (Here’s an HHS page explaining rate review, here’s a helpful state-specific tool and here’s the recent announcement on savings.)
But in some states, all the officials can do is wag their finger.
“At the end of the day, the companies can tell us to pound sand,” says Dave Jones, the insurance commissioner in California, one of 13 states where the rate reviews are not binding. “It’s very frustrating. Frankly, our hands are tied behind our back.”
Jones has found some increases unreasonable and said so loud and clear. But the carrier doesn’t have to listen.
HHS’s power is limited too. The health law allows HHS to review rates where the state doesn’t – but it doesn’t have a lot of power. Review means review – not regulate, revise or re-do. HHS can make an insurer be transparent about price hikes and consumers can use that information. The publicity and public information may cause insurers to exercise restraint – HHS says it has and some experts agree. And the related medical loss ratio rules (requiring health plans to spend at least 80 percent – 85 percent for larger groups – of the premium dollar on health not profit ,marketing and administration) also works in tandem to restrain increases.
But HHS can’t order the carriers to roll back rates. Attempts to pass legislation to give the federal regulators more power have so far failed.
The Marketwatch article (which I discovered via @CharlesOrnstein) goes into more detail on how all this plays out in the individual, small business and large group markets. It’s a good clear overview, and you may be surprised that the bluest of the states aren’t necessarily the best at rate review. The article notes that groups like Consumer Watchdog aren’t happy. And some insurers say regulating too aggressively will drive some health plans out of the market – reducing competition in some states which could lead to even bigger price hikes later.
How does this play out in your state? Here are some ideas to find out, using some of the HHS links above as a starting point.
Does your state have the power to review rates or does HHS do as a backup. Is anyone trying to change that? What happened?
If the state reviews – how much power does it have to affect the rates?
Are regulators clamoring for more power? Why or why not? Do they want to get out of the review business altogether and let a deregulated market set rates?
What do the insurers say? Consumer groups? What do the experts on your state’s insurance market expect to happen when the exchanges launch in 2014. How do the plans for the state exchange take the state price trends into account?
This RWJF-Health Affairs brief explains rate review in more detail. It’s a year old, but a helpful overview.