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As New Health Insurance Rate Increases Become Effective, Consumer Group Provides Analysis & Offers Recommendations
Today, the Arizona PIRG Education Fund released A Glimpse into Arizona’s Health Insurance Rate Review Program. The document provides an initial analysis on how effectively Arizona is reviewing proposed health insurance rate increases for the individual market since taking over that responsibility from the federal government. Under the Patient Protection and Affordable Care Act (ACA), any proposed premium health insurance rate increase of 10 percent or greater needs to be reviewed.
While the Arizona Department of Insurance (ADOI) is required to provide transparency for applicable rate increases, require justification from insurers, scrutinize rate increase proposals, and determine if a proposed rate increase is reasonable or unreasonable; ADOI lacks the authority from the state to deny an unjustified or unreasonable rate increase.
According to Diane E. Brown, Executive Director of the Arizona PIRG Education Fund, “Arizona can protect consumers by carefully examining proposed health insurance rate increases and operating in a transparent manner. However, to prevent rate shock, ADOI needs the authority to deny unreasonable rate hikes.”
Working with an actuary in Arizona, the Arizona PIRG Education Fund assessed four different rate filings chosen in part to provide a sampling of well-known and lesser known insurers; rate increases about to occur in either the individual or small group market; and to highlight any positive or negative trends that may impact the cost of health care for Arizonans.
Three of the actuarial reviews are for rate increases effective as of today:
- Blue Cross Blue Shield of Arizona has a 10.9% average annual rate increase impacting 67,248 individuals which includes a 14.8% rate increase on 12,829 individuals renewing during July 1-September 30, 2013,
- Golden Rule Insurance Company (parent company is UnitedHealthcare) has an 18.5% average weighted rate increase proposed (10.4% over the previously filed rate increase) impacting 31,946 individuals, and,
- Aetna Small Group has a 14.1% rate increase impacting 46,916 individuals
The fourth review, Blue Cross Blue Shield of Arizona, is for an increase effective 10/1/2013 which will be a 13.3% average annual rate increase including a 15.7% rate increase on individuals renewing during October 1-December 31, 2013.
The group included factors deemed relevant to best protecting consumers in their review including:
- Was the average rate increase proposed based on clear methodology, data and calculations?
- Are certain individuals expected to receive a significantly higher or lower increase than the proposed average, and if so, what factors contribute to this calculation?
- Was the projected medical costs and assumptions adequately supported by data and calculations?
- Has the insurer demonstrated an effort to control the underlying rise in medical costs while improving quality? and,
- Was there evidence of the insurer making efforts to cut waste?
Key findings included:
1. ADOI deserves credit for encouraging stakeholders to offer suggestions to improve transparency of the filings and the rate review process, alerting interested parties when an applicable rate increase is filed and has been determined, and being responsive to inquiries on the rate process and on specific filings.
2. Information about proposed health insurance rate increases is difficult to find on the ADOI website; in particular, it is challenging to access the actual rate filing.
3. The complete rate filing does not appear to be transparent. For example, supplemental information, such as documents from the insurer in response to a question from ADOI, does not appear to be publicly available.
4. Insurers appear to have not provided the public with sufficient information to justify their proposed rate increase and the underlying assumptions, particularly in the case of the insurers’ projected medical costs.
5. Affordable Care Act (ACA) Medical Loss Ratios are sometimes only narrowly surpassing the 80% standard and may require insurers’ to issue rebates if their medical costs come in under projections.
6. Insurers are currently not required to show that proposed rate increases are based on reasonable administrative costs and are not required to explain what they are doing to reduce rising medical costs in ways that improve quality.
7. ADOI can determine a rate increase to be unjustified; however, they do not have the authority from the state to protect consumers from an unreasonable rate increase.
Based on assessment of the rate filings, the Arizona PIRG Education Fund recommends that ADOI conducts the following to strengthen the effectiveness of our state’s health insurance rate review process:
1. Further expand transparency. Make the filings easier to locate on the ADOI website and make supplemental filing documents publicly available;
2. Require insurers to thoroughly justify rate increase proposals. The justification should include the data and calculations necessary to evaluate their proposal as well as reasonable administrative costs and a strategy to lower health care costs. ADOI should then carefully scrutinize each of the insurers’ justifications; and,
3. Request and advocate for authority to deny rate increases that are unjustified or unreasonable to better protect individual consumers and small businesses from excessive rate increases. Over thirty other states already have prior approval authority for at least some insurance products, including New Mexico, Nevada and Colorado.
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