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 $3,979,002 to Tennessee 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 Tennessee. On May 30, 2011, Governor Haslam signed into law a bill expanding the Department of Insurance’s scope of review and prior approval authority to individual and small group policies. The Department is currently working on regulations to accompany its new approval authority.

As of July 1, 2011, all small group and individual health insurance rates must be filed in advance for approval by the Commissioner. Additionally, the Department is exploring ways to incorporate use of Tennessee’s All Payer Claims Database to improve its rate review process.

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.

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

• Introduce legislation:Tennessee will review existing and new laws, legislative development, forms development. The State will consider further legislation and regulations to improve its rate review process.
• Expand scope of rate review: With the help of Cycle I grant funds Tennessee gained prior approval authority in the small group market. Cycle II funding will help support this expanded authority.
• Improve rate filing requirements:Tennessee will continue to support its All Payer Claims Database (APCD) and make infrastructure improvements to use additional data in reviewing rates.
• Improve transparency and consumer interfaces:Tennessee will add a public comment capability on its website.
• Hire new staff:Tennessee will provide training to staff and propose an internship program.
• Improve IT:Tennessee is proposing to utilize cutting-edge software for actuary use in modeling and benchmarking.

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)