State and federal insurance premium rate reviews resulted in the denial, withdrawal or modification of an estimated $1 billion in health insurance rate increases in the individual and small group markets, according to the 2012 Annual Rate Review Report released Tuesday by the Department of Health and Human Services.
The rate review program requires insurers to publically disclose proposed increases and justify any requests to raise premiums. Although many states have long supported review programs, the federal program only went into effect on Sept. 1, 2011, so the 2012 report reflects the first nationwide effort to assess healthcare insurance premium rates.
The program includes a includes a provision of the Patient Protection and Affordable Care Act that requires premium rate reviews for increases of 10% or more in the individual and small group markets. That provision accounted for $148.4 million of the denials.
"The healthcare law is holding insurance companies accountable and saving billions of dollars for families across the country," HHS Secretary Kathleen Sebelius stated during a press conference to announce the report's release. "Thanks to the law, our healthcare system is more transparent and more competitive."
She added that the results of premium increase rate reviews indicate that the health insurance market is now "working for consumers the way markets are supposed to work. Insurers are being forced to offer more competitive prices."
The rate reviews assess whether proposed increases in health insurance premiums are based on reasonable estimates of the next year's cost of providing services to enrollees and accurately reflect changes in medical expenses and healthcare utilization.
Of the double-digit increases reviewed, 36% were found to be reasonable, 26% were rejected, 12% were withdrawn, and 26% were modified to meet requirements.
The largest savings were recorded in California ($34.6 million), New York ($20.2 million), and Michigan ($15.5 million). According to the report, the implemented rate increases were reduced on average by 2.8 percentage points.
Officials declined to attribute any of the premium costs savings to either a slowing down of demand or increased competition among health insurers.
"It's not a reflection of the economy," explained Gary Cohen, Director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare & Medicaid Services. "The savings reflects the different in the increase they requested and the increase they received."
Some 44 states handle at least a portion of their own reviews, but HHS handles complete reviews in the individual and small group market for Alabama, Arizona, Louisiana, Missouri, Montana and Wyoming.
Some states such as Montana don't have the legal authority to review health insurance rates while others lack the resources to mount an effective review.
HHS initially earmarked $250 million in grants to help states expand the scope and quality of their rate review processes. Among the key steps taken by several states is the hiring of actuaries to review rate increases.
The HHS report was released on the same day that the Kaiser Family Foundation announced the results of a separate, unrelated study that found that a family with employer-sponsored healthcare saw their premiums increase 4.5% in 2012.
While HHS officials declined to specifically address that report's findings. Cohen said he was heartened by the fact that the premium increase over the past year was the "lowest in decades."
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
