Rate review targets double-digit premium hikes

Print Friendly and PDF By: Andy Miller Published: Dec 3, 2012

Call it more transparency and accountability –- or simply more publicity.

For the past year, health insurers’ requests for premium increases of 10 percent or more have received more attention from the public and regulators.

That’s due to a provision in the health reform law called “rate review,’’ wherein any insurer proposing a double-digit hike in an individual or small-group plan must submit more documentation to justify it. And ultimately, those requests are receiving more public scrutiny.

Over the past year, with the new rate review rules in effect, Georgia insurance regulators say they have seen insurers’ requests for premium increases becoming more moderate.

Still, several Georgia health insurance companies are currently seeking to raise premiums on individual and small-group policies by 12 percent to 25 percent.

The companies include Aetna, UnitedHealthcare, Blue Cross and Blue Shield of Georgia, and Kaiser, as well as Celtic Insurance, Connecticut General Life, Trustmark Life, and Union Security. Here’s a link to the listings.

An increase of 10 percent or more in health insurance premiums is well above the rate of inflation. It can eat significantly into a family’s income or cause an owner of a small business to debate whether to continue offering coverage to workers.

In September, HHS estimated that consumers nationally had already saved about $1 billion on their premiums through rate review.

According to the HHS report, almost two-thirds of the rate-review determinations were either found to be unreasonable, or were modified or withdrawn.

Individual states –- including Georgia –- made 69 percent of the rate-review determinations and HHS decided on the other 31 percent.

Georgia is doing its own, thanks to its designation as an ‘‘effective rate review state.’’

Last year, Georgia originally was told in a June letter that it did not meet the ‘‘effective rate review criteria.’’ But the state insurance department responded that it would ‘‘conduct an effective and timely review of rate filings by all health insurers.’’ And it pledged more transparency for consumers.

Tom Carswell of the Georgia insurance department said state reviewers consider, among other factors, changes in general medical inflation and an insurer’s losses from medical claims in determining whether to approve a rate increase. The costs of an individual or small-group plan can skyrocket with one catastrophic illness, regulators note.

Often the insurer is approved for an increase, but it’s smaller than the one requested, said state Insurance Commissioner Ralph Hudgens. “If they ask for 12 percent, we may approve 8.5 percent,’’ he said.

One plan was approved for a 25 percent rate hike because of the losses it had experienced, said Carswell, assistant director of the Division of Insurance Product Review. That increase, though, was significant for policyholders, he noted.

Carswell told GHN that requests for premium hikes have moderated over the past year.

“The 10 percent threshold had a cooling off [effect], at least for the year beginning 2012,’’ Carswell said.

A major element of the Affordable Care Act is injecting more transparency into insurance pricing, said Bill Custer, a Georgia State University health insurance expert. But he added that one year is not enough time to demonstrate a firm cause-and-effect relationship between rate review and pricing moderation.

Bill Rencher of the consumer advocacy group Georgia Watch said rate review ensures that double-digit increases are not imposed arbitrarily.

And rate review helps buttress other ACA requirements, Rencher said. “For example, consumer protections such as the Medical Loss Ratio and Guaranteed Issue could be rendered meaningless if insurance companies were free to raise their rates to any level they chose at any time,” he said.

The health insurance industry, meanwhile, faces other pricing pressures in 2013, and even more so in 2014, when the ACA is scheduled to be fully implemented.

The 10 percent threshold is an arbitrary figure set by the federal government, said Graham Thompson, executive director of the Georgia Association of Health Plans.

Thompson said the medical inflation rate itself is projected at 7.5 percent for 2013. In addition, requiring “essential health benefits’’ will add to the costs of health plans in 2014, he said, and he asserted that hospital consolidation, which is proliferating in Georgia, ‘‘always drives up costs.’’

Cindy Zeldin of the consumer group Georgians for a Healthy Future noted the Georgia has not accepted federal grant money to beef up its review staff.

Zeldin said the rate review provisions may have a deterrent effect on price increases. “If an insurance company knows it’s not justified, they’re probably not going to ask for it,’’ she said. An insurer ‘‘can’t just do it in the dark –- they have to justify it.’’

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