Rate Setting Transparency

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Over 15 million Americans stand to benefit from a strong health insurance rate review system, with the number growing each year. But in many states the rate review laws—and how they are carried out—fall short. Health insurance is one of the most expensive purchases consumers make, it is vital to the financial and physical health of their families, and it is required under the Affordable Care Act. ... The process of health insurance rate review is even harder to track across states. The Department of Health and Human Services (HHS) designated all but five states as “effective rate review states.” Although this suggests the health insurance rate review process is working in most states, the fact is that truly effective rate review only happens when strong laws are enacted and carried out assertively and openly on behalf of consumers. In fact, very few states have strong laws and review processes, and HHS has not stepped in to perform oversight or supersede state authority when necessary. In some states, regulators have politicized the health insurance rate review process. In Florida, the state legislature prevented the insurance department from reviewing the rates of Marketplace plans for two years. In Ohio and Florida, press releases describing 2015 rates were widely criticized as biased and misleading. ... California and Oregon have enacted laws that give them authority to review all rates, but most states use the federal threshold. Ten percent is a very high ceiling (Figure 1), and long-term annual growth in per capita health spending growth is well below ten percent, as is wage growth for consumers. It’s time for the federal government to lower the review threshold and raise the bar on rate regulation. We believe that transparency is best for consumers. True to that belief, in states with prior approval authority and an active review process—such as Oregon, New York, and Maryland—final health insurance rates were in many cases lower than those initially proposed. Alternatively, an active purchaser state Marketplace can also provide robust scrutiny of rates. ... On the basis of this exemption, HHS withheld 2015 rate filings from the public despite its legal obligations and a Freedom of Information Act request from Consumers Union and over-seventy co-signors; this refusal is now the subject of a separate lawsuit. The trade secret exemption is designed to protect businesses from having key business and manufacturing details revealed to competitors for fear they will be stolen. Rate setting is far different from product development and actuarial calculations are not trade secrets. ... We need a rate review system that is transparent and open, regardless of whether the state or federal government is conducting the review. Ensuring fair health insurance rates and public confidence in them requires transparency and accountability. To that end: We support state or federal regulatory authority requiring prior approval of premium rates before they go into effect and/or an active purchaser review process by the Marketplaces. The standard for rate review must permit rate approval or disapproval based on a range of factors designed to determine if rates are excessive or underpriced. Rate filings should be standardized for all insurers and should provide detailed justification and supporting documentation for all rate increases or decreases. We call for a state commitment to transparency for the public that includes: policyholder notification at the beginning of the rate review period, access to the full rate filings as well as consumer-friendly summaries, a public comment period, and public hearings where appropriate and viable. HHS must make publicly available all rate review justifications, and underlying data, submitted to it. There must be a commitment to complete transparency on all levels—state and federal—which means prohibiting the use of the trade secret exemption by carriers. The integrity of the review process and public confidence in the validity of health insurance rates depend on it.

Rate Setting Transparency