The MLR, or the proportion of a premium spent on medical claims vs. profit and administration, was a topic that previously interested only the wonkiest of health wonks. But this year it became a hot issue that moved thousands of consumers across the country to contact their insurance commissioners and demand greater transparency and understanding of how our premium dollars are spent. And in a surprising turn in early December, the U.S. Department of Health and Human Services released regulations on the MLR that kept one of the more controversial parts of the MLR, broker fees, as part of the calculation.

More recently, there were some significant state wins on retaining a strong MLR standard. Both Florida and Michigan insurance commissioners applied to “adjust” (read: reduce) the amount that insurers must spend on medical claims. After strong advocacy by state partners in FL and MI, the Center for Consumer Information and Insurance Oversight (CCIIO), the federal agency charged with deciding the MLR rule, denied both states’ requests to ease the MLR for insurers. The headline: consumer protections won out over insurers’ financial interests.

So what does this mean? One reason the MLR is a big deal is that if insurers do not actually meet the MLR standards, they must provide consumers with rebates, starting in 2012. This very tangible benefit of the ACA was improved by CCIIO’s recent decision to make these rebates tax-free, and to require notices to consumers detailing the amount of the rebate and health plan’s MLR along with an explanation of what it means. Stay tuned for more details from CCIIO on how those rebates will roll out. And for now, be thankful that the Affordable Care Act provided this valuable tool to help protect consumers.

– Christine Barber, Senior Policy Analyst

Unfortunately, that probably happens more often than anyone would like. With support from the Kaiser Family Foundation, we at Georgetown University Health Policy Institute recently completed a study of how state insurance departments review and regulate insurance company rate increases. We found wide variations in state authority and practice. In particular:

– A state’s authority to review and approve rate increases in advance does not necessarily protect consumers from large rate increases, because the rigor and thoroughness of the review process varies across states.
– Many states do not have enough trained actuaries to review all filed rates. In addition, statutory clauses can “deem” rates approved if not acted on within 30 or 60 days, limiting states’ ability to conduct thorough reviews.
– Some states with statutory authority to disapprove rates can only exercise that authority in certain situations, such as for specific insurers or products (i.e., non-profit Blue Cross Blue Shield plans or HMOs). Others provide alternative regulatory pathways for insurers allowing them to avoid state review of their rates.
– Most interviewed states use subjective standards to guide the review and approval of rates, such as rates cannot be “excessive, inadequate, or unfairly discriminatory.” Such standards give states more flexibility, but can make the process appear arbitrary to the public.
– Most interviewed states have made little or no effort to make rate filings transparent. In many cases, carriers can designate some portions of the rate filing to be “trade secret” and thus not available to the public.

Under the Affordable Care Act (ACA), states are given unprecedented new resources to expand their review of health insurance rate increases. Many of the state regulators we spoke to plan to use the new money to hire new actuaries, conduct more thorough reviews and post more information on their website. The law also requires health plans that propose an “unreasonable” rate increase to provide a public justification for it. The Department of Health and Human Services (HHS) is expected to put out a rule defining an “unreasonable” increase in the coming days.

Based on our research, I think it’s important for advocates to know the following:

1. Your state’s “prior approval” authority over rate increases doesn’t protect consumers from them. Even in states with full “prior approval” review authority, most rate review is conducted informally, without consumer input. Your insurance department’s leadership, resources and a culture of active review are equally if not more important.
2. Find out whether your state insurance department has – or intends to hire – an on-staff health actuary. States should not rely on the health plan’s “actuarial certification” that its rates are justified. Rate review is not mechanical – it involves nuanced judgment calls. If you’re the actuary for the health plan, you’ll probably make those judgment calls in favor of your employer, whereas if you’re an actuary paid by taxpayers, you’re more likely to make those calls in favor of consumers.
3. The HHS rule on rate review, as well as state standards, should provide an unambiguous and clear definition of an “unreasonable” increase. They should include objective metrics such as rate increases greater than a certain percentage of the Medical Consumer Price Index, or increases that are greater than 10 percent of the previous year’s filings would trigger an “unreasonable” designation. Such objective metrics shouldn’t be the final word, but should shift the responsibility to the health plan to prove its proposed increase is reasonable.
4. Advocates should encourage their states to do more to make rate filings transparent, including posting the full filing on the Department website, not just summaries. More than anything else, greater sunshine on this process can provide both the information and motivation for meaningful rate reviews that will help lower premiums for consumers.

For more detail on the results of our study, including a sortable state-by-state table of rate review authority, see the report on the Kaiser Family Foundation’s website.

– Sabrina Corlette, guest blogger
Georgetown University Health Policy Institute

Making the economic case for health care reform

Sure, the Senate health care reform bill will help families save between $500 and $7000 a year on health insurance premiums, will limit out-of-pocket costs, and will cover 31 million uninsured people — Old News! But did you know the Senate bill is also good for the Economy? This fact sheet tells why. Download and share it.

Fighting the legal challenges facing national reform

And while the federal debate moves ahead, reform opponents in the states are already mounting constitutional and legislative challenges. Our new paper looks at these legal challenges and their political context, and offers talking points and organizing suggestions to respond, so you’ll be ready for Law & Order: Health Care Reform Unit!

–Kate Petersen,  Health Policy Hub