Controlling costs through HHS rate reviews
2012 Progress Report: Health Reform is Opening the Insurance Market and Protecting Consumers
HealthCare.gov, March 22, 2012
The Affordable Care Act’s Rate Review policies bring an unprecedented level of scrutiny and transparency to health insurance rate increases. They ensure that, in every state, every proposed increase of 10% or more is evaluated by independent experts to assess whether they are based on reasonable assumptions and sound data.
Rate review is expected to help moderate premium increases and provide consumers with greater value for their premium dollar. Additionally, health insurance companies must provide easy to understand information to their customers about their reasons for significant rate increases, as well as publicly justify and post on their website any unreasonable rate increases.
The Affordable Care Act’s Rate Review program started for most individual and small group plans on September 1, 2011.
Through March 10, 2012, 186 increases affecting more than 1.3 million people have been posted on companyprofiles.healthcare.gov. Each provides an explanation from the insurer, including the rate increases determined to be unreasonable rate increases.
States are taking a strong lead in reviewing proposed rate increases. Of the 186 requested increases posted on HealthCare.gov as of March 10, 2012, two-thirds (125 filings) of these are being reviewed by rate review programs in the states. Only one-third (61 filings) is under review by HHS.
In the 61 instances to date where HHS is charged with conducting reviews, the Department has completed 28 determinations. HHS has determined that 20 of the 28 proposed rate increases are unreasonable. The most common reason for this determination is that the proposal would result in projected medical loss ratios (MLRs) below the 80% applicable threshold.
By Don McCanne, MD
The title of today's message, "Controlling costs through HHS rate reviews," is deliberately deceptive to make a point. Supposedly, the Affordable Care Act (ACA) was designed to help control spending in health care, and the insurance premium Rate Review process was a component of cost containment. In fact, not only does the process have no impact on health care spending, it doesn't even have any federal control over increases in health insurance premiums.
ACA regulations require that any plan with premium increases of 10 percent or more be reviewed. Although states may have some influence over rate increases, the federal government has no authority to do anything about the increases other than expose the insurers to public ridicule.
In the last six months, 20 rate increases reviewed by the federal government have been found to be unreasonable, primarily because they exceeded the 20 percent of the premium that they could use for administrative services and profits. Many of these insurers in the individual market will find that their inefficiencies are so great that they will be unable to comply with this requirement, so they really don't need ridicule to drive home this point.
In the meantime, insurers will be able to increase their premiums 9.9 percent each year with no questions asked, at least not by the federal government. Compound that rate over several years, and then where will we be?
Obviously this ACA measure to "control costs" will have very little impact, if any, on insurance premiums and absolutely no impact on total health care spending.
There is a much more efficient model of health care financing that actually would slow the increase in health care spending while ensuring health care for everyone. Instead of playing ACA games, we should move forward with an improved Medicare for everyone.