Rate Review Rules Hold Down Premiums

The ACA’s rate review program may be responsible for holding down health insurance premium increases.  The report by the Kaiser Family Foundation finds that this may be true even in states that had review programs before the ACA went into effect. Under rate review, states and the federal government review proposed premium increases of 10% or more.

The average rates implemented were lower than the average rates requested in 21 states. For example, in Iowa and Oregon, the average rate that went into effect was more than 4% lower than the average rate requested by the carrier. In contrast, there was no difference between the average rates requested and the average rates that went into effect in 11 states plus D.C.  The following are statistics for California:

• Number of filings submitted – 65
• Number of filings lowered, rejected, or withdrawn – 14
• Average rate change requested – 9.9%
• Average rate change implemented – 9.3%

The new 10% threshold for review may have discouraged insurers from proposing increases of 10% or more in states that did not have rate review programs before the ACA. Increased emphasis on rate review and transparency may have given state regulators an incentive to apply greater scrutiny during rate review. Federal rate review enabled many states to enhance their rate review processes by hiring additional actuarial staff.

The rates that went into effect averaged 20% lower than the rates initially requested for filings submitted to state regulators during 2011. Nationwide, about one in five requests by insurers to change premiums were denied, lowered, or withdrawn during state review.  The difference between average rates requested and implemented was greater in the individual market than in the small group market, though the individual market also saw higher average requested rates.

Insurers have been submitting fewer requests above the 10% threshold following implementation of the ACA’s rate review standards. Also, after September 1, 2011, rate requests above 10% were more likely to be denied, modified, or withdrawn than similar requests made earlier in the year.

Proposed increases of 10% or more are now published on HealthCare.gov whether they are reviewed by state or federal regulators. While regulators may be able to exert pressure on insurers to control costs more aggressively, rate review cannot alter the factors driving increases in health care costs, such as the underlying prices charged by doctors and hospitals, the amount of health care utilized by enrollees, and new medical technologies, according to researchers.http://www.kff.org/healthreform/upload/8376.pdf

Last Updated 10/4/2017

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