HHS releases new report showing how rate review protects consumers

WASHINGTON--(BUSINESS WIRE)-- U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius today announced Affordable Care Act grant awards of $3,724,651 to Rhode Island that will help fight unreasonable premium increases and protect consumers. Today, HHS also released a new report entitled Rate Review Works detailing how previous rate review grants are fighting premium hikes and helping make the health insurance marketplace more transparent.

“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.”

As of 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.

The Affordable Care Act provides States with $250 million in Health Insurance Rate Review Grants, $48 million of which has 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 are already making a difference in Rhode Island. The state is using grant funds to further analyze the effect of cost drivers and hospital utilization on rate increases. Additionally, the Department has developed an internal rate database to house and track filing information. Rhode Island used funds throughout the grant period to host open public meetings where presentations included findings related to cost driver analysis.

The grants awarded today 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.

Rhode Island is proposing to use Cycle II grant funds in the following ways:

• Expand scope of rate review:Rhode Island will use funds to create an operations manual for the rate review process. The manual will culminate in the issuance of a regulation to institutionalize Rhode Island’s rate review process and procedures.
• Improve rate filing requirements:Rhode Island will collaborate on the development of revisions to its Health Insurance Supplemental Annual Statement and enhance insurer compliance with the affordability standards.
• Improve transparency and consumer interfaces:Rhode Island will work with new staff to develop a written and web based consumer guide to Rhode Island health insurance consumer services.
• Hire new staff:Rhode Island will create 4 new positions with Cycle II grant funding; these positions are in addition to the 1 position created with Cycle I resources.
• Improve IT:Rhode Island is interested in utilizing an All Payer Claims Database to support its research into hospital payments and utilization. Rhode Island will also support efforts to develop a public portal for direct consumer access to the All Payer Claims Database once complete.

A summary of how each State will use the new resources can be found in the report released today.

“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.”

Information about significant State achievements with previous rate review grants can also be found in the report.

Rate review builds on other provisions in the Affordable Care Act to help make health insurance more affordable for individuals, families, and businesses. Other steps the law takes to 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. 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.

For the full Rate Review Works report, please visit: http://www.healthcare.gov/law/resources/reports/rate-review09202011a.pdf

For a fact sheet on the awards announced today, please visit: http://www.healthcare.gov/news/factsheets/2011/09/rate-review09202011a.html

Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

HHS Press Office
202-690-6343

Source: U.S. Department of Health and Human Services (HHS)