Rate review, the process where insurance regulators scrutinize health carriers’ proposed premium increases, is a crucial consumer care tool. This process ensures premiums are justified, based on accurate data and realistic cost projections. It directly impacts consumers’ healthcare costs and financial well-being.
The Mechanics of Rate Review
Historically, states managed rate review for fully insured products with varying approaches. The Affordable Care Act (ACA) introduced minimum standards, mandating that the U.S. Department of Health and Human Services (HHS) and states establish review processes for annual increases exceeding a certain threshold (currently 10%). This review determines if proposed increases are reasonable. States can adopt lower thresholds, and HHS reviews rates for states lacking “effective rate review” programs.
Consumer Impact of Rate Review
Rate review significantly impacts consumers. Directly, it can lead to lower approved rates. Indirectly, the requirement for carriers to justify increases encourages cost containment and quality improvement efforts. Oregon’s process, which includes reviewing underlying provider costs, exemplifies this. Rigorous review can uncover errors, leading to cost savings. For instance, in 2014, Oregon identified calculation errors, resulting in significant rate cuts proposed by Kaiser and Providence Health Plan, which were further reduced by regulators.
Evidence of Cost Savings
While quantifying rate review’s impact is challenging, evidence suggests it effectively contains premium growth, particularly in states with prior approval requirements. Colorado’s FAIR Act (2008), shifting to prior approval, saved consumers over $125 million in five years.
An HHS report indicated that rate review saved consumers approximately $993 million in premiums in 2013. Public participation, including consumer advocate involvement, strengthens cost containment. In Maryland, consumer advocates collaborated with the commissioner to identify flaws in a 2014 filing, resulting in premium increases being cut by more than half.
Strengthening Consumer Protection
Despite its importance, rate review processes often fall short. Millions of Americans with fully insured coverage could benefit from improvements. While most states have HHS-certified programs, few boast strong laws and processes. HHS intervention is lacking in states with deficient oversight, resulting in substantial premium increases in areas like Florida and Alaska.
Recommendations for Improvement
Several actions could enhance consumer benefits from rate review:
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Lowering the Review Threshold: Expanding review to include smaller rate increases, as done in California and Oregon, would benefit consumers.
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Increasing Transparency: Improved public access to rate filings, eliminating trade secret exemptions, and enabling public participation enhances scrutiny and fairness. Timely release of complete, unredacted filings by HHS is crucial.
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Strengthening Regulatory Authority: Prior approval authority or active purchaser exchanges empower regulators to deny unreasonable rates.
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Expanding Review Scope: Considering factors like cost containment efforts and administrative expenses, as in Oregon, fosters accountability and cost efficiency.
Conclusion
Rate review, a potent consumer care tool, needs strengthening to maximize its potential. Legislators and regulators must prioritize consumer needs over insurer desires to avoid scrutiny, ensuring fair and affordable health insurance for all.
