For more than a decade, health insurance premiums have risen rapidly, straining the pocketbooks of American families and businesses. Since 1999, the cost of coverage for a family of four has climbed 131 percent.[i] These increases have forced families and employers to spend more money, often for less coverage. Many times, insurance companies have been able to raise rates without explaining their actions. In most cases, consumers receive little or no information about proposed premium increases, and aren’t told why health insurance companies want to raise rates.
The Affordable Care Act is bringing an unprecedented level of scrutiny and transparency to health insurance rate increases. The Act ensures that, in any State, any proposed rate increase by individual or small group market insurers at or above 10 percent will be scrutinized by independent experts to make sure it is justified. This analysis will help moderate premium hikes and lower costs for individuals, families, and businesses that buy insurance in these markets. Additionally, insurance companies must provide easy to understand information to their customers about their reasons for unreasonable rate increases, as well as publicly justify and post on their website any unreasonable rate increases. These steps allow consumers to know why they are paying higher rates.
The Affordable Care Act makes $250 million available to States to take action against insurers seeking unreasonable rate hikes. To date, 43 States and the District of Columbia are using $250 million in grants provided by HHS to help them improve their oversight of proposed health insurance rate increases.
State rate review activities are paying off for consumers:
Starting September 1, 2011, insurers seeking rate increases of 10 percent or more for non-grandfathered plans in the individual and small group markets are required to publicly disclose the proposed increases and the justification for them. Such increases will be reviewed by State or Federal independent experts to determine whether they are unreasonable. The proposed increases will also be made publicly available through HHS, State and/or insurer websites.
The rate review regulations work in conjunction with other parts of the Affordable Care Act that will also hold premiums down. The law requires insurers to spend at least 80 percent of premium dollars on direct medical care or to improve the quality of care instead of on overhead, advertising, and executive salaries and bonuses. If an insurer fails to meet that test, they must pay a rebate to their enrollees. This “medical loss ratio” regulation, released on November 22, 2010, makes the health insurance marketplace more transparent and increases the value consumers receive for their money.
HHS encourages States to conduct rate review and has worked with States to strengthen their programs. As detailed in the rate review regulation finalized on May 19, 2011, and amended in 2011, 2012 and 2013, 2015, and 2016, States with effective rate review systems must conduct reviews of proposed rates above the applicable threshold (currently at or above10%), but if a State lacks the resources or authority to conduct the required rate reviews, HHS will conduct them.
An effective rate review system:
To determine whether a State met these standards, HHS reviewed all available documentation, and met with State regulators and their staff to verify the information and obtain any updates. CMS will continue to accept information from States and monitor States in order to ensure correct classification. CMS can reevaluate the status of this list as changes are made in each State.
HHS also issued an amendment to the rate review final rule making clear that coverage sold to individuals or small groups through an association is subject to rate review, on or after November 1, 2011. The list below indicates whether Federal or State process will be used to review proposed insurance rate increases in each market.
As of April 8, 2016:
The list below indicates whether Federal or State process will be used to review proposed insurance rate increases.
Updated April 8, 2016.
State |
Individual Market |
Small Group Market |
Individual & Small Group Effective Rate Review Program |
---|---|---|---|
Alabama |
Federal |
Federal |
Yes |
State |
State |
Yes |
|
State |
State |
Yes |
|
Arkansas |
State |
State |
Yes |
California |
State |
State |
Yes |
Colorado |
State |
State |
Yes |
Connecticut |
State |
State |
Yes |
Delaware |
State |
State |
Yes |
District of Columbia |
State |
State |
Yes |
Florida |
State |
State |
Yes |
Georgia |
State |
State |
Yes |
State |
State |
Yes |
|
State |
State |
Yes |
|
Illinois |
State |
State |
Yes |
Indiana |
State |
State |
Yes |
State |
State |
Yes |
|
Kansas |
State |
State |
Yes |
Kentucky |
State |
State |
Yes |
Louisiana |
State |
State |
Yes |
Maine |
State |
State |
Yes |
Maryland |
State |
State |
Yes |
Massachusetts |
State |
State |
Yes |
Michigan |
State |
State |
Yes |
Minnesota |
State |
State |
Yes |
Mississippi |
State |
State |
Yes |
Missouri |
Federal |
Federal |
No |
Montana |
State |
State |
Yes |
Nebraska |
State |
State |
Yes |
Nevada |
State |
State |
Yes |
New Hampshire |
State |
State |
Yes |
New Jersey |
State |
State |
Yes |
New Mexico |
State |
State |
Yes |
New York |
State |
State |
Yes |
North Carolina |
State |
State |
Yes |
North Dakota |
State |
State |
Yes |
Ohio |
State |
State |
Yes |
Oklahoma |
Federal |
Federal |
No |
State |
State |
Yes |
|
State |
State |
Yes |
|
Rhode Island |
State |
State |
Yes |
South Carolina |
State |
State |
Yes |
South Dakota |
State |
State |
Yes |
Tennessee |
State |
State |
Yes |
Texas |
Federal |
Federal |
No |
Utah |
State |
State |
Yes |
State |
State |
Yes |
|
Virginia |
State |
State |
Yes |
Washington |
State |
State |
Yes |
West Virginia |
State |
State |
Yes |
Wisconsin‡ |
State |
State |
Yes |
Wyoming |
Federal |
Federal |
No |
* Oregon State law exempts from rate review association plans that retain 95% or greater of their employer groups (ORS 73.734)
** Pennsylvania will have effective rate review authority for the non-association commercial small group market effective March 21, 2012 per newly enacted legislation (Act 134 (renumbered) of 2011). Until that date, CMS will review Pennsylvania non-association commercial small group products while the State will continue to review rates for all other non-association products. As for the association rates, effective March 21, 2012, Pennsylvania will begin reviewing rates for small group associations sitused in Pennsylvania along with the rates for individual associations sitused in the State that it is already reviewing. CMS will continue to review the rates for individual and small group associations that are not sitused in Pennsylvania.
*** In Vermont, non-sitused plans are exempt from filing with the State under the following circumstances (8 V.S.A. § 3368):
Note: In this chart, the term “sitused” refers to the State where the policy (not the individual certificate) is issued; the Situs State is the State that has the primary jurisdiction and whose laws, rules, and regulations govern the policy. Additionally, for the purposes of this chart, an “exempt” plan is one that is exempt under State law from State rate review requirements.
[i] http://ehbs.kff.org/pdf/2010/8085.pdf
i “U.S. Department of Health and Human Services Rate Review Annual Report,” U.S. Department of Health and Human Services, September 2014
http://aspe.hhs.gov/health/reports/2014/RateReview/rpt_RateReview.pdf
ii “U.S. Department of Health and Human Services: Rate Review Annual Report,” U.S. Department of Health and Human Services, September 2013
http://aspe.hhs.gov/health/reports/2013/acaannualreport/ratereview_rpt.cfm