Rate Review, Alone, Has Lowered Insurance Rates

graphwrestleCalifornia insurance commissioner Dave Jones often says that simply having health insurance rate reviews won’t rein in excessive premium hikes – hence his support for a public initiative to let the state decide the rates for health insurance carriers. But a study by the California Public Research Interest Group (CALPIRG) finds that rate review has been effective in moderating costs.

Under Calif.’s rate review law established in 2011, health insurance carriers must publicly justify any proposed rate increase on individual or small group plans. Health insurance carriers must submit rate filings to state officials for review, and the public can access the filings online and comment on them.

Depending on the type of health insurance, filings are reviewed by the Calif. Department of Insurance (CDI) or the Department of Managed Health Care (DMHC). Regulators post rate-filing documents and give the public the opportunity to review and comment. The regulators then meet with the carriers to clarify or challenge the assumptions driving projected cost increases, or request any missing information. They can request that the carriers modify or reduce rate increases if they find that they are unjustified but the insurance company can decide whether to comply with the request. If they do not, the regulator can make an official determination that the rate filing is “unreasonable.”

Health insurance carriers have filed 369 proposed rate changes in the individual and small group markets. As a result of objections raised in the rate review process, carriers have voluntarily reduced or withdrawn 44 rate hikes. Rate review has saved California consumers and small businesses $349 million in health insurance premiums since 2011, according state regulators.

But in order to fully protect consumers and small businesses from unreasonable rate hikes, rate review must be strengthened, according to CALPRIG.  CALPRIG recommends extending rate review to large groups. The adoption of SB 1182 (Leno) would extend the scope of rate review to the large group market. Despite its finding that rate review, alone, is effective in moderating rate hikes, CALPRIG says that regulators must have the authority to reject or modify rates. CALPRIG says that insurers should have to itemize their administrative expenses, and justify any increase exceeding the rate of inflation. Insurance companies should be required to report what strategies they are using to improve care and cut waste. For more information, visit www.calpirg.org.

Last Updated 12/02/2020

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