Shedding Light on Insurance Industry Practices
By Jay Angoff, Director of the Office of Consumer Information and Insurance Oversight
For years now, health insurance companies have been raising their rates – more than doubling insurance costs in the last 10 years – making it difficult, if not impossible, for many families to afford health insurance so they can get the medical care they need and still make ends meet. This year alone, some insurance companies have proposed double-digit premium increases, sometimes without reason or justification.
This is not acceptable. And today, we are taking another step forward in holding insurance companies accountable and moderating rate increases.
New regulations proposed today, as part of the new health care law, would bring an unprecedented level of transparency and scrutiny to proposed health insurance rate increases. These proposed regulations would require insurers to publicly disclose and justify unreasonable rate increases.
Just as American families are playing by the rules, now so must insurance companies.
So how does this work exactly? Under this proposed regulation, States would continue to be the first line of defense against double digit rate increases – through a process called “rate review,” which I wrote about here. And, beginning in 2011, insurers in every State seeking rate increases of 10 percent or more for new plans in the individual and small group market would have to publicly disclose and justify the proposed increases.
This unprecedented new transparency in the health insurance market will empower consumers, promote competition, encourage insurers to do more to control health care costs and discourage insurers from charging premiums which are unjustified.
We know rate review works. Recently, in Connecticut, one insurer requested an increase of 20 percent. The Insurance Department rejected this increase as excessive, and because of the law in Connecticut, it cannot go into effect. You can read about the story here. In Massachusetts, one insurance company requested an increase of 26 percent for premiums. After rate review the rate review process, consumers saw a less than 13 percent increase.
Unfortunately, not every State has the authority or the resources to take that kind of action. The new health care law provides States with tools and resources they need to toughen their oversight of insurance premiums.
Our goal is to protect you from unreasonably high rate increases by providing you with detailed information on proposed increases. Publicly disclosing proposed increases, along with the insurer’s justification, will shed light on industry pricing practices that experts believe have led to unnecessarily high prices.
Along the same lines, insurers are also going to have to give you more value for your health care dollar. New rules generally referred to as “medical loss ratio” rules require insurance companies to spend 80-85% of your money on actual health care services and quality improvement activities---not on overhead. Any insurer that does not meet this standard will also have to give plan members a rebate.
By making insurance companies accountable to you and transparent to all, we will see them think twice before unreasonably hiking your premiums. One of the main goals of the health care law is to make care more affordable. These new rules will go a long way towards achieving just that.
To read more about the new rules, click here.