If any insurance company, say your auto insurer or home owners insurer raised your premiums an unreasonable amount what would you do? I suspect you would switch insurance companies, perhaps give that little lizard a boot in the butt. When it comes to health insurance it takes the federal government to tell you what is unreasonable. We all better hope that the denials being made by regulators are themselves reasonable. A small change in assumptions can make a big difference in outcomes and if premiums are too low, there will be a great deal of catching up to do. Remember, a premium set in 2011 is designed to cover claims incurred through 2012 which may not be reflective of experience in the past twelve months. Actuaries know this of course, but let us hope political pressure is not influencing the many variables that go into setting premiums.
If you look at the release below you will see a rate cut for Anthem Blue Cross in Connecticut. However, when you go to the HHS link in the press release you find this:
Connecticut Rate Review
The Rate Review program began September 1, 2011. No insurers in Connecticut have proposed rate increases of 10% or more since that time. Check back regularly for updates.
Then we have the following hype. HHS is incapable of preparing a press release containing just facts, but rather must include more and more spin and unsubstantiated claims.
“The Affordable Care Act includes several policies, including rate review, to continue this slow growth. By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.”
In fact only rate review has been implemented, the efforts at coordinated care are focused on Medicare, preventive disease programs have been used by employers for many years with no measurable results and the state-based marketplace is two years away.
News Release
Affordable Care Act holding insurers accountable for premium hikes. Health insurance premium increases in five states have been deemed “unreasonable” by the U.S. Department of Health and Human Services, HHS Secretary Kathleen Sebelius announced today.
After independent expert review, HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming. The excessive rate hikes would affect nearly 10,000 residents across these five states.
To make these determinations, HHS used its “rate review” authority from the Affordable Care Act (the health care law of 2010) to determine whether premium increases of over 10 percent are reasonable.
“Before the Affordable Care Act, consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability,” said Secretary Kathleen Sebelius. “Now, insurance companies are required to disclose rate increases over 10 percent and justify these increases. It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so.”
In these five states, Trustmark has raised rates by 13 percent. For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2 percent and 18.1 percent, respectively. These increases were reviewed by independent experts to determine whether they are reasonable. In this case, HHS determined that the rate increases were unreasonable because the insurer would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.
In addition to the review of rate increases, many states have the authority to reject unreasonable premium increases. Since the passage of the health care reform law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets.
Examples of how states have used this authority include:
In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.
Today’s announcement comes the same week that a report showed that health care spending has grown at remarkably low rates. According to an analysis done each year by the Centers for Medicare & Medicaid Services, U.S. health care spending experienced historically low rates of growth in 2009 and 2010. A recent study released by Mercer Consulting also showed a slow-down in the average employee health benefit cost to businesses.
The Affordable Care Act includes several policies, including rate review, to continue this slow growth. By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.
For more information on the specific determinations made today, please visit http://companyprofiles.healthcare.gov/
Related articles
- Unreasonable Rate Review for Health Insurance (forbes.com)
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