Reining in Excessive Health Insurance Premium Increases

It’s not uncommon to hear stories of individuals and families who opened their mail only to learn that their health insurance premiums are going up dramatically again. Over the last 10 years, average premiums have more than doubled, putting many Americans in the difficult position of having to choose between health care and other necessities. In 2010 alone, individual market insurers, who cover 14 million Americans, requested premium increases of, an average, 20 percent.  These kinds of rate hikes are not sustainable and lead to millions of people no longer being able to afford coverage every year.

Thanks to the Affordable Care Act, we now have new tools and resources for States to hold insurance companies accountable and put a halt to unreasonable premium increases. One powerful tool is called rate review, a process that requires insurers to submit their proposed rate increases to State Insurance Departments for review and, in some States, approval before they can go into effect. To help States conduct such reviews, today, we announced $46 million in grant awards to States, part of a $250 million investment in consumer protection over the next few years.

Earlier this year, my boss, Health and Human Services Secretary Kathleen Sebelius – who is the former Governor and Insurance Commissioner of the State of Kansas – called on insurance companies to justify premium increases of as much as 39 percent.  Her actions, and those of several States, led many insurers to back off and withdraw their unjustifiable premium increases.

Although most States have some system for looking at insurance rates, there is much more they can do to help people like you.  These grants are the first step in improving those systems and making them work better for Americans and small businesses purchasing their own insurance.

States will use these grants to make a number of different types of improvements.  In general, insurance companies will have to submit more information about why their proposed rate increases are necessary, and States will be better able to evaluate rate proposals and determine if they are necessary.

The end result is that Americans will know that their insurance companies will be held accountable for raising rates – accountability that should lead to affordability.