HHS Releases New Report Showing How Rate Review Protects Consumers
WASHINGTON--(BUSINESS WIRE)-- HHS Secretary Kathleen Sebelius today announced Affordable Care Act grant awards of $109 million to 28 states and the District of Columbia that will help fight unreasonable premium increases and protect consumers. Today, HHS also released a new report entitled Rate Review Works detailing how previous rate review grants are fighting premium hikes and helping make the health insurance marketplace more transparent.
“We’re committed to fighting unreasonable premium increases and we know rate review works,” said Secretary Sebelius. “States continue to have the primary responsibility for reviewing insurance rates and these grants give them more resources to hold insurance companies accountable.”
As of September 1, 2011, the Affordable Care Act requires health insurers seeking to increase their rates by 10 percent or more in the individual and small group market to submit their request to experts to determine whether the rates are unreasonable. The Affordable Care Act also requires insurance companies to publicly justify unreasonable premium rate increases. These provisions will bring greater transparency, accountability, and, in many cases, lower costs for families and small business owners who struggle to afford coverage.
The Affordable Care Act provides states with $250 million in Health Insurance Rate Review Grants, $48 million of which has previously been awarded to 42 states, the District of Columbia and five territories. As outlined in the new report, these grants and other state rate review efforts are already making a difference:
- In July 2011, Oregon recently forced an insurer to lower its request for a rate hike by nearly 10 percent. 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 percent 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.
The previous grants also contributed to nine states passing legislation to strengthen their ability to review and prevent excessive premium increases.
The grants awarded today help to create a more level playing field by improving how states review proposed health insurance rates and holding insurance companies accountable for disclosing information about unjustified rate increases.
States are proposing to use Cycle II grant funds in the following ways:
- Introduce legislation: Seven states are introducing legislation to strengthen their authority to review and/or publicize proposed rate increases.
- Expand scope of rate review: Nineteen 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 funds to improve rate filing requirements, 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: Twenty-three states and the District of Columbia are proposing to hire new staff during Cycle II to help review rates and protect consumers.
- Improve IT: Twenty-seven 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 report released today.
“The proposals from the states overwhelmingly demonstrate the need, and desire, for new resources and tools to hold insurance companies accountable,” said Steve Larsen, Director, Center for Consumer Information and Insurance Oversight. “Thanks to the Affordable Care Act, states will have more of the tools they need to crack down on insurance companies that want to pass unreasonable premium hikes on to hard working families.”
Information about significant state achievements with previous rate review grants can also be found in the report.
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 percent of premium dollars on health care and quality-improvement activities as opposed to overhead, advertising, and executive 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 percent of the cost of coverage for their workers. That amount rises to 50 percent 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.
For the full Rate Review Works report, please visit: http://www.healthcare.gov/law/resources/reports/rate-review09202011a.pdf.
For a fact sheet on the awards announced today, please visit: http://www.healthcare.gov/news/factsheets/2011/09/rate-review09202011a.html.
Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.
HHS Press Office
KEYWORDS: United States North America District of Columbia
INDUSTRY KEYWORDS: Health Public Policy/Government Healthcare Reform Public Policy White House/Federal Government Professional Services Insurance General Health Managed Care