Hot off the heels of $1.1 billion in rebates from insurance companies that failed to meet the medical loss ratio (MLR) standard, the ACA is again saving money for consumers. The Department of Health and Human Services (HHS) just released a new report that finds that rate review, or increasing transparency over insurance premium rate increases, has saved consumers about $1 billion in the past year. These savings, calculated by determining what insurance companies would have set as premiums versus what they actually were allowed to do, is another way the ACA is making insurance companies play by fairer rules.
Rate review practices vary across states, but the ACA provided new tools, including grants to enhance state regulators’ capacity, that have strengthened many states’ ability to review and approve insurance premiums before they go into effect. In addition, the ACA created a federal standard whereby any insurance company with a rate increase of more than 10 percent is automatically subject to review. Under this new scrutiny, HHS found that 50 percent of rate increase requests were lowered or denied – meaning 800,000 consumers saw lower premiums.
States have won concrete savings for consumers because of rate review: New York saved an estimated $20 million for small businesses, and Michigan saved more than $15 million for individuals and small businesses. Overall, HHS estimates that the difference between insurers requested and allowed rates amounted to 1.4 percent lower premiums in the individual market, and 0.8 percent lower premiums in the small group market. These reductions amount to about $1 billion in insurance savings for consumers.
The even better news is that there is opportunity for more savings. While states have improved their rate review processes since the passage of the ACA, many still lack strong authority to negotiate or disapprove premium increases. And there is a lot more work to be done to increase transparency in rate increases and make the process clearer and more accessible to consumers.
Community Catalyst will soon have some materials on how to work with your state on rate review – so stay tuned!
– Christine Barber, Senior Policy Analyst