New Resources to Help States Crack Down on Unreasonable Health Insurance Premium Hikes

For too long, insurance companies in many States have increased health insurance premiums with little oversight, transparency, or public accountability. Health insurance premiums have doubled on average over the last 10 years, much faster than wages and inflation, putting coverage out of reach for millions of Americans and business owners. Today, just 26 States and the District of Columbia have the legal authority to reject a proposed increase that is excessive, lacks justification or otherwise exceeds State standards. Many States that have the authority lack resources to exercise it meaningfully. This lack of authority and resources for States has created an uneven playing field for consumers and contributed to unjustified premium increases in some States.

Recent examples of insurance premium hikes reviewed by States, based on public reports, include:

In New Mexico, Blue Cross Blue Shield proposed to raise health insurance premiums by an average of 21 percent 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 percent for plans sold on the individual market.
In Oregon, Regency Blue Cross Blue Shield requested a 20 percent premium increase for 2009.
In Rhode Island, UnitedHealth, Tufts, and Blue Cross requested 13 to 16 percent rate increases for 2009.
In Washington, in 2007, health insurance premiums for some individual health plans increased by up to 40 percent 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 premiums increases. Applications for the first round of Health Insurance Premium Review Grants were made available on June 7.

On August 12, President Obama announced the award of $46 million to enhance States’ current processes for reviewing health insurance premium increases. Forty-five States and the District of Columbia applied for grants, and each will receive $1 million in grant funds to help improve reviewing 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 have been confronted with large, double-digit health insurance premium hikes. The proposals from the States overwhelmingly demonstrate the need, and desire, for new resources and tools to hold insurance companies accountable.

Today, the authority to prevent unreasonable premium increases varies considerably across States and across markets. In 44 States and the District of Columbia, insurance companies in some markets need only file their rates in order to begin charging higher premiums. In 33 States and the District of Columbia, proposed rate increases in some markets are reviewed before they go into effect. Even fewer – 26 States and the District of Columbia – have the authority to reject a proposed increase that is excessive, lacks justification or otherwise exceeds State standards. Experience has shown that, in these States, proposed health insurance premium increases can 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 percent instead of the nearly 23 percent they initially requested.
In 2010, Oregon disapproved health insurance premium requests of 10 percent, 18 percent and 20 percent in the individual market.
In February of 2010, Anthem Blue Cross of California requested a 39 percent 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 will provide States with the resources they need to perform this type of review.

Helping States Hold Health Insurers Accountable

States have proposed to use this funding in a variety of ways in their grant proposals.

Additional Legislative Authority: 18 States and the District of Columbia will pursue additional legislative authority to create a more robust program for reviewing or requiring advanced approval of proposed health insurance premium increases to ensure that they are justified.
Expand the Scope of Health Insurance Premium Review: 21 States and the District of Columbia will expand 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 46 State grantees will require 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: 42 States and the District of Columbia will 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: All State grantees will develop and upgrade existing technology to streamline data sharing and put information in the hands of consumers more quickly.

A chart summarizing how each State will use the new resources can be found at http://www.healthcare.gov/news/factsheets/2010/08/rateschart.htm l.

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

The grants build on the Obama Administration’s work with States to implement the Affordable Care Act. Earlier this year, Secretary Sebelius called on certain insurance companies to justify large premium increases and encouraged State and local officials to obtain stronger health insurance premium review authorities under State laws. This increased scrutiny by the Administration and by several States has led to the withdrawal or reduction of several proposed health insurance premium increases that in some cases turned out to be based on faulty assumptions and data.

Future Actions

The Health Insurance Premium Review Grants are one element of a broad effort under the Affordable Care Act to reduce the unreasonable premium increases proposed by some insurers today. Additional resources from this $250 million program will be available in subsequent years to further strengthen State health insurance premium review procedures. Other statutory provisions designed to improve affordability include:

In 2011, the Affordable Care Act allows the Secretary of the U.S. Department of Health and Human Services to review justifications for unreasonable increases in premiums and make them public;
In 2011, insurers will generally be required to spend at least 80 percent of premium dollars on medical care services and quality-improvement activities and limit their spending on overhead, marketing, CEO salaries, and profits; and
In 2014, the Affordable Care Act empowers States to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance Exchanges.

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. Some of the provisions that take effect by the end of next year, or are already in effect, include prohibitions on pre-existing condition exclusions for children; prohibition 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: August 16, 2010