To help fight health insurance premium hikes
U.S Department of Health and Human Services (HHS) Secretary Kathleen Sebelius has announced Affordable Care Act grant awards of $3,984,080 to North Carolina that will help fight unreasonable premium increases and protect consumers. HHS also released a new report entitled Rate Review Works detailing how previous rate review grants are fighting premium hikes and helping make the health insurance marketplace more transparent.
“We’re committed to fighting unreasonable premium increases and we know rate review works,” said Secretary Sebelius. “States continue to have the primary responsibility for reviewing insurance rates and these grants give them more resources to hold insurance companies accountable.”
The Affordable Care Act requires health insurers seeking to increase their rates by 10 percent or more in the individual and small group market to submit their request to experts to determine whether the rates are unreasonable. The Affordable Care Act also requires insurance companies to publicly justify unreasonable premium rate increases. These provisions will bring greater transparency, accountability, and, in many cases, lower costs for families and small business owners who struggle to afford coverage.
The Affordable Care Act provides States with $250 million in Health Insurance Rate Review Grants, $48 million of which has previously been awarded to 42 states, the District of Columbia and five territories. As outlined in the new report, these grants and other state rate review efforts are already making a difference in North Carolina.
As a result of the Affordable Care Act grant funds, the North Carolina General Assembly expanded the Commissioner of Insurance’s prior approval authority over health insurance rates in North Carolina to include all small group products, in addition to existing authority over all individual products. Last year, thanks to this new authority, North Carolina saved beneficiaries $14.5 million by reducing a rate increase request from the state’s largest insurance company. The department also hired seven new rate review staff, including an actuary and an attorney. The actuary’s primary duties focus on how best to adjust the Department’s rate review process, especially given its new authority. The attorney’s activities include how best to restructure and standardize statutory authority across markets, products and types of insurers, and how to incorporate a hearing into the current rate review process.
The grants help to create a more level playing field by improving how states review proposed health insurance rates and holding insurance companies accountable for disclosing information about unjustified rate increases.
North Carolina is proposing to use Cycle II grant funds in the following ways:
• Introduce legislation: North Carolina will propose legislation to require rate filing information submitted by insurers to be considered public. North Carolina will also propose statutory and regulatory changes to create rate filing consistency and may revise statutes to meet the statutory requirements of 2014.
• Expand scope of rate review: The North Carolina Department of Insurance was recently granted prior approval authority of small group rates. Cycle II grant funds will help support this expanded authority.
• Improve rate filing requirements: North Carolina plans to make statutory and regulatory changes to create consistency across rate filings by market and product types. North Carolina will work with an actuarial firm to develop a rate review process manual.
• Improve transparency and consumer interfaces: North Carolina is currently pursuing legislative action to make rate filings public. The Department of Insurance will also develop a plan for considering consumer comments in its review of rate filings and providing consumer summaries of filings. The state will hire a Health Insurance Outreach Specialist to design, develop, implement and monitor a program to educate consumers on the rate review process. North Carolina is also evaluating the role of hearings in the rate review process.
• Hire new staff: North Carolina will create three new positions with Cycle II grant funding; these positions are in addition to the six positions created with Cycle I resources.
• Improve IT: North Carolina plans to evaluate various actuarial tools to enhance the rate review process, possibly including tools or software for performing trend analyses and assisting in assumptions validation when reviewing a rate filing.
A summary of how each state will use the new resources can be found in the report released today.
“The proposals from the States overwhelmingly demonstrate the need, and desire, for new resources and tools to hold insurance companies accountable,” said Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight. “Thanks to the Affordable Care Act, States will have more of the tools they need to crack down on insurance companies that want to pass unreasonable premium hikes on to hard working families.”
Information about significant state achievements with previous rate review grants can also be found in the report.
Rate review builds on other provisions in the Affordable Care Act to help make health insurance more affordable for individuals, families, and businesses. Other steps the law takes to help make insurance more affordable include:
• Insurers are generally required to meet a medical loss ratio standard to spend at least 80 percent of premium dollars on health care and quality-improvement activities as opposed to overhead, advertising, and executive bonuses. Insurers that fail to meet that standard must either reduce premiums or pay rebates to consumers and employers;
• Small businesses are eligible for federal tax credits of up to 35 percent of the cost of coverage for their workers. That amount rises to 50 percent by 2014; and
• In 2014, the Affordable Insurance Exchanges will use competition and transparency, including information on excessive or unjustified premium increases, to help make insurance more affordable.
The Affordable Care Act includes a variety of provisions designed to promote accountability, affordability, quality, and accessibility in the health care system for all Americans, and to make the health insurance market more consumer- friendly and transparent. Some of the provisions are already in effect, including prohibitions on pre-existing condition exclusions for children; prohibitions on lifetime dollar limits in all health plans; extended access to insurance for many young adults; and an unprecedented level of transparency about health insurance through www.HealthCare.gov.