The Department of Health and Human Services just
announced $200 million in grants to states to enhance their capacity to review
health insurance premium increases. This is good news for families struggling
with health insurance premium increases year after year. As Michael Miller of
Community Catalyst put it during the HHS conference call, “families’ incomes
don’t jump every year by 10-15% the way premiums do. Families have to make tough
decisions as a result, meaning many lose their coverage.”
In many states, premiums are going up and up and up with
almost no scrutiny by state insurance departments. In a report we authored with
the Kaiser Family Foundation last year, we found that states’ authority and
capacity to review premium rate increases varies considerably. Some states
rigorously check insurers’ facts and projections and reject excessive
increases, while other states aren’t authorized to review rates at all.
There is no question that when insurance departments
rigorously review insurers’ rate increases and engage the public in the
process, consumers benefit. In state after state that has conducted
comprehensive rate reviews, insurers’ proposed rates have come down because the
department questioned or disapproved their rate. Conversely, in states that
don’t have a culture of active rate review, it usually takes an egregious and
unjustified increase for them to ask for reductions or demand refunds for
consumers.
The ACA establishes important new tools and resources for
states to more effectively protect consumers from premium hikes. First, it
requires an annual review of unreasonable rate increases, and any increase
found to be unreasonable will have to be posted on a public website. Second, it
provides a pool of $250 million to state insurance departments to help them
expand rate review and make it more publicly accessible.
In August of last year, HHS awarded the first $46 million
of that pool to states to help with rate review. The most recent funding
announcement allows states to apply in August for a $3 million grant, to be
spent over three years. If a state doesn’t apply for funding this year, they
can apply in August 2012 for a $2 million grant, to be spent over 2 years.
States can use the money to strengthen their rate review programs by hiring and
training new staff, including actuarial experts, and providing for a more
transparent and publicly accessible process.
HHS is also creating a new $27.5 million performance
bonus pool for states that enact laws to give their insurance commissioner
greater authority to review and disapprove premium increases. States that do so
would be eligible for $400,000 to $600,000 in bonus awards.
They’re also establishing a “workload” bonus pool of $22.5
million for states that have large populations or a large number of insurance
carriers, so that state insurance departments with a greater workload can
access additional funding.
This is all good news for consumers, if their state
applies for the grant funding. Unfortunately, the current political climate
suggests that some states will decline the money. I would call that “cutting
off their nose to spite their face,” since in the end it’s their own citizens
and small businesses that will continue to suffer from runaway health
inflation.