Published June 08, 2012
Why is your health insurance so expensive?
In some cases, it's because your insurer was simply allowed to increase premiums unchecked.
But not anymore. Under health care reform's "rate review" provision, all proposed rate increases of 10% or more must be gone over by independent experts. If the planned price hikes don't stand up to scrutiny, states can negotiate them down or, where authorized, deny them outright. The law also makes it easy for you to track how your health insurer's rate proposals have stood up to the test.
Since the crackdown on rising premiums began last September, Connecticut reduced a proposed Anthem Blue Cross Blue Shield increase from 12.9% to 3.9%, New Mexico trimmed a Presbyterian Healthcare rate hike from 9.7% to 4.7%, and New York held three companies' average proposed increases of 12.7% to 8.2%.
Cutting down price hikes that are deemed unreasonable is just one facet of the federal rate review initiative. Under the Affordable Care Act, or ACA, health insurance companies in every state now must publicly justify any proposed rate increase at or above the 10% threshold, in postings on the federal Healthcare.gov rate review website. Think of it as a report card for your health insurance company.
You can log on to the site and search by state or health insurer to see if and why your premiums may be jumping at least 10%, and read the findings by state or federal examiners on whether a requested increase passed muster. To date, more than 185 rate increases affecting 1.3 million policyholders have been posted to the site.
Later this year, the "medical loss ratios" of health insurers also will be posted, giving you a closer look at whether your insurer is meeting the health care law's requirement that at least 80% of your premium be spent directly on medical care. If that's not the case, the insurance company will now owe you a rebate for the difference.
"The whole point of the Affordable Care Act is to create this very open, transparent marketplace so that consumer choice can guide toward better outcomes," says Brian Chiglinsky, spokesman for the federal Centers for Medicare & Medicaid Services. "We're trying to prompt consumers to say, 'Should I be buying this policy?'"
Kansas Insurance Commissioner Sandy Praeger, who chairs the Health Insurance and Managed Care Committee of the National Association of Insurance Commissioners, says health care reform's rate review program will help states stand up to insurance companies.
"Some states have had what's called 'prior approval authority' to review and modify health insurance rate increases for years, some have prior authority over the individual market but not the small group market, and some have no rate review at all," she says.
Insurance commissioners don't view rate gouging as a widespread problem, Praeger says. "A company that is charging excessive rates isn't going to last very long because if the rate's not justified, somebody else will compete."
Still, she says insurance commissioners who have not been given much power over rates would like help putting heat on their state legislators. "I think a little pressure from the feds to help those states get that authority would be welcome because that ultimately protects the consumer, and it's the insurance commissioners who have to deal with angry consumers when the rates go up," Praeger says.
Anticipating just such a need, the architects of the health care overhaul created a $250 million grant program to help states bolster their rate review processes. At least 42 states and the District of Columbia have received more than $157 million in funding.
"The grant program has helped the number of states with prior approval authority jump from 30 to 37 at last count," says Chiglinsky.
The real impact of the rate review initiative won't hit most consumers until 2014, when state health insurance "exchanges" are scheduled to open, says Deborah Chollet, senior fellow and health economist at the policy research firm Mathematica.
"The real issue has been, and will continue to be until 2014, that people are locked into these policies; they can't leave," Chollet says. "If I'm confronted with a huge increase, I can't jump to a lower-cost policy because if I go to another policy, I will be underwritten. If I have anything wrong with my health status, I'll be denied, and then I'll have no coverage at all."
Chiglinsky agrees things will get better when the exchanges come online in 2014. "If you change your mind based on this (rate review) information, you can easily log on to an exchange, put in some information about yourself and buy a new policy."
He says the review process under health care reform already is causing companies to think twice before asking for double-digit increases in health insurance premiums.
"A lot of them are taking much closer scrutiny of their rate increases, and a lot are proposing fewer rate increases above that 10% threshold," he says. "Some insurers are playing by the rules in giving consumers a fair shake, and some aren't. This exposes the ones that aren't."