Grants to States under Affordable Care Act Help Fight Health Insurance Premium Hikes

HHS Secretary Kathleen Sebelius announced on September 20, 2011 that under the Affordable Care Act, 28 states and the District of Columbia have been awarded grants totaling $109 million, to help fight unreasonable health insurance premium increases and protect consumers.

On September 20, HHS also released a new report entitled Rate Review Works detailing results produced by previous rate review grants made under the Affordable Care Act toward fighting premium hikes and making the health insurance marketplace more transparent. The report also details how states receiving the new grants have proposed to use the funds toward making health insurance more affordable for consumers.

“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.”

Starting on September 1, 2011, 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,” HHS said in a release issued on September 20, 2011.

Results Produced by Previous Insurance-Rate-Review Grants Made under Affordable Care Act

Under the Affordable Care Act, states are to receive a total of $250 million in Health Insurance Rate Review Grants, $48 million of which had 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 have already produced results for consumers. Here are some examples sited in the HHS release:

• In July 2011, Oregon forced an insurer to lower its request for a rate hike by nearly 10 percent.  This put money back in the pockets of approximately 60,000 consumers.
• Over the past year, at the direction of the state insurance commissioner, Arkansas has been negotiating with insurance companies requesting rate increases greater than 10 percent on their individual health insurance products.  The commissioner recently negotiated a lower rate affecting approximately 90,000 policyholders.
• Last year, thanks to new rate review authority, North Carolina saved beneficiaries $14.5 million by reducing a rate increase request from the state’s largest insurance company.
• The previous grants also contributed to nine states passing legislation to strengthen their ability to review and prevent excessive premium increases, according to HHS.

Additional information about significant state achievements with previous rate review grants can be found in the Rate Review Works report issued on September 20.

States’ Proposed Uses of New Grants

The additional $109 Million of grants awarded September 20, 2011 (Cycle II under the Affordable Care Act grants), will “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,” HHS said.

As reported by HHS, the recipient states have proposed to use the new grant funds in the following ways:

• “Introduce legislation: Seven states are introducing legislation to strengthen their authority to review and/or publicize proposed rate increases.
• Expand scope of rate review: Nineteen states and the District of Columbia are proposing to use grant funds to expand the scope of rate review, for example, by reviewing rates in new markets or by reviewing rates for new products.
• Improve rate filing requirements: All 28 states and the District of Columbia are proposing to use grant funds to improve rate filing requirements, such as requiring insurers to provide additional information on administrative costs and requiring insurers to file rate increases in a standardized format.
• Improve transparency and consumer interfaces: All 28 states and the District of Columbia are proposing to use grant funds to improve consumer interfaces, such as developing a Rate Review Home Page at the Department of Insurance Website and providing opportunities for consumers to comment on proposed rate hikes via the website.
• Hire new staff: Twenty-three states and the District of Columbia are proposing to hire new staff during Cycle II to help review rates and protect consumers.
• Improve IT: Twenty-seven states and the District of Columbia are proposing to use grant funds to enhance IT capacity through the development of new or improved rate reporting systems designed to collect more robust rate data and allow for advanced analysis of rate filings.”

A summary of how each state will use the new resources can be found in the Rate Review Works report released on September 20.

“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,” Mr. Larsen said.

Other Provisions of the Affordable Care Act Making Health Insurance More Affordable

Rate review is one of several provisions in the Affordable Care Act intended to help make health insurance more affordable for consumers and businesses.  As summarized by HHS, other provisions of the law that will 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,” HHS said. 

“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,” the HHS release stated.

More Information

The full Rate Review Works report, is available on HealthCare.gov.

A fact sheet on the insurance rate review awards announced on September 20, 2011, is also available on HealthCare.gov.

See also the HelpingYouCare™ reports on:

Government Imposes Review on All Premium Rate Hikes of 10% or More by Health Insurers

Health Insurers Report Record Profits, Yet Raise Premiums, While People Postpone Care

Seniors on Medicare Have Saved $ Millions Due to Affordable Care Act, CMS Reports

Under Affordable Care Act, Preventive Services Now Free to Medicare Beneficiaries

Affordable Care Act Has Saved Medicare Beneficiaries $260 Million on Prescription Drugs in 5 Months

New Rules to Simplify Purchase of Health Insurance Proposed under Affordable Care Act

$137 Million for Prevention & Health Programs is Granted to States under Affordable Care Act

And, see the HelpingYouCare™ resource pages on VoicesForCare™, including:

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