New Affordable Care Act rules shed light on high health insurance rate hikes

New proposed Affordable Care Act regulations announced today by the U.S. Department of Health and Human Services (HHS) will bring new transparency and scrutiny to proposed health insurance rate increases. These proposed rules allow HHS to work with states to require insurers to publicly disclose and justify unreasonable rate increases.

“Year after year, insurance company profits soar, while Americans pay more for less health care coverage,” said Secretary Sebelius. “The Affordable Care Act is bringing unprecedented transparency and oversight to insurance premiums to help reign in the kind of excessive and unreasonable rate increases that have made insurance unaffordable for so many families.”

Health insurance premiums have risen rapidly over the past decade, straining pocketbooks for American families and businesses. Since 1999, average premiums for family coverage have risen 131 percent.

The Affordable Care Act has already begun to help states strengthen or create rate review processes. On August 16, HHS awarded $46 million to 45 states and the District of Columbia to help them improve their oversight of proposed health insurance rate increases. This is part of $250 million that the health reform law makes available to states to take action against insurers seeking unreasonable rate hikes.

Today’s proposed regulations will build on these efforts by requiring insurers in all states to publicly justify any unreasonable rate increases beginning in 2011. In 2011, proposed rate increases of 10 percent or higher will be publicly disclosed and thoroughly reviewed to determine if the rate increase is unreasonable. After 2011, state-specific thresholds would be set using data and trends that better reflect cost trends particular to each state. Insurance company’s justifications for unreasonable increases will be posted on HealthCare.gov and the insurance plan’s website.

“The proposed rate review policy will empower consumers, promote competition, encourage insurers to do more to control health care costs and discourage insurers from charging premiums which are unjustified,” said Jay Angoff, director of HHS’ Office of Consumer Information and Insurance Oversight.

Under the proposed regulation, states with effective rate review systems would conduct the reviews. If a state lacks the resources or authority to do thorough actuarial reviews, HHS would conduct them. Meanwhile, HHS will continue to make resources available to states to strengthen their rate review processes.

In 2014, the Affordable Care Act empowers states to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance exchanges.

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Statement from HHS Secretary Kathleen Sebelius on News that California Insurer, Anthem, is Withdrawing Proposed 39 Percent Rate Increase

Today's announcement is good news for the more than 800,000 Californians who could have been hit with massive rate increases and gives them some much-needed temporary relief. Since these rate hikes were first announced, I have heard from countless Americans who have been stretched to the limit by high health insurance premiums. This result was achieved because those who oversee the insurance industry on the state and federal levels heard these voices, held investigations, and demanded action.

The Affordable Care Act will ensure that people across this country have access to the affordable, quality care they deserve. As we implement this law, our Department, and especially our new Office of Consumer Information and Insurance Oversight, will closely monitor the industry, and we will not hesitate to act to prevent exorbitant premium hikes.

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Analysis Shows Narrow Age Rating Would Raise Premiums by Nearly 50 Percent, Causing Many Young and Healthy to Forgo Coverage

/PRNewswire/ -- Allowing age adjustments more restrictive than 5 to 1 would cause dramatic premium spikes for the young and healthy in the individual insurance market, making coverage unaffordable for many according to a new analysis.

The Blue Cross and Blue Shield Association (BCBSA) released today new data, prepared by Oliver Wyman's Actuarial and Health and Life Sciences practice, showing that a 2 to 1 age rating ratio would increase premiums for the youngest and healthiest Americans in the individual market in many states by nearly 50 percent in the first year, relative to a 5 to 1 age rating ratio.

Currently 42 states permit health plans to vary premiums based on age by 5 to 1 or more -- the primary benefit being that premiums are kept affordable for younger individuals to encourage broad participation. If more restrictive age ratings are implemented, younger people would opt out of purchasing coverage. Oliver Wyman estimates that, over a five year period, more than 1 million younger members would leave the market, resulting in a 10 percent premium increase overall for individuals in some parts of the country.

"An affordable, sustainable insurance market requires broad participation across all age groups to maintain more affordable premiums. As this analysis shows, overly restrictive age rating regulations would hurt a large portion of those with individual coverage -- making coverage less affordable and undermining the key goals of healthcare reform," said Scott P. Serota, president and CEO of BCBSA. "To ensure the long-term sustainability of healthcare reform, we must strike the right balance on age rating to avoid disproportionately burdening one segment of the population over another. For this reason, we support a 5 to 1 age rating similar to what the vast majority of states permit today."

The Oliver Wyman analysis also finds that restricting age rating ratios to 3 to 1 would increase premiums in many states by as much as 30 percent for younger people, relative to a 5 to 1 ratio.

"Younger individuals are much more sensitive to the costs of health insurance compared to older individuals. The bottom line is that if premiums are too high, young and healthy individuals simply will not purchase insurance and their needed cross-subsidies for older, sicker people will be lost, increasing the cost of healthcare for everyone," Serota said.

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