The Department of Health and Human Services just announced $200 million in grants to states to enhance their capacity to review health insurance premium increases. This is good news for families struggling with health insurance premium increases year after year. As Michael Miller of Community Catalyst put it during the HHS conference call, “families’ incomes don’t jump every year by 10-15% the way premiums do. Families have to make tough decisions as a result, meaning many lose their coverage.”
In many states, premiums are going up and up and up with almost no scrutiny by state insurance departments. In a report we authored with the Kaiser Family Foundation last year, we found that states’ authority and capacity to review premium rate increases varies considerably. Some states rigorously check insurers’ facts and projections and reject excessive increases, while other states aren’t authorized to review rates at all.
There is no question that when insurance departments rigorously review insurers’ rate increases and engage the public in the process, consumers benefit. In state after state that has conducted comprehensive rate reviews, insurers’ proposed rates have come down because the department questioned or disapproved their rate. Conversely, in states that don’t have a culture of active rate review, it usually takes an egregious and unjustified increase for them to ask for reductions or demand refunds for consumers.
The ACA establishes important new tools and resources for states to more effectively protect consumers from premium hikes. First, it requires an annual review of unreasonable rate increases, and any increase found to be unreasonable will have to be posted on a public website. Second, it provides a pool of $250 million to state insurance departments to help them expand rate review and make it more publicly accessible.
In August of last year, HHS awarded the first $46 million of that pool to states to help with rate review. The most recent funding announcement allows states to apply in August for a $3 million grant, to be spent over three years. If a state doesn’t apply for funding this year, they can apply in August 2012 for a $2 million grant, to be spent over 2 years. States can use the money to strengthen their rate review programs by hiring and training new staff, including actuarial experts, and providing for a more transparent and publicly accessible process.
HHS is also creating a new $27.5 million performance bonus pool for states that enact laws to give their insurance commissioner greater authority to review and disapprove premium increases. States that do so would be eligible for $400,000 to $600,000 in bonus awards.
They’re also establishing a “workload” bonus pool of $22.5 million for states that have large populations or a large number of insurance carriers, so that state insurance departments with a greater workload can access additional funding.
This is all good news for consumers, if their state applies for the grant funding. Unfortunately, the current political climate suggests that some states will decline the money. I would call that “cutting off their nose to spite their face,” since in the end it’s their own citizens and small businesses that will continue to suffer from runaway health inflation.