Turf Battle or Promising Partnership? Understanding Marketplaces’ Responsibility to Offer Affordable Health Insurance

Last week, local news in the District of Columbia reported on a what they called a “turf battle” between DC Health Link, DC’s health insurance marketplace, and the DC Department of Insurance, Securities and Banking (DISB) over the review premium rates for health plans sold on the marketplace. The cause of the controversy? DC Health Link hired an independent actuarial firm to review participating insurers’ proposed rates, evaluate their justification, and recommend appropriate adjustments. The actuaries did so, and recommended some significant reductions in the proposed rate increases for some carriers. However, DISB, using its own actuaries, came to a different conclusion and approved higher rates than those recommended by the independent analysts.

State departments of insurance have historically had primary responsibility to regulate health insurance rates, and they’ve done so with widely varying degrees of enthusiasm. In the wake of media reports highlighting the impotence of some state regulators in the face of dramatic premium increases, drafters of the Affordable Care Act (ACA) enacted provisions to ensure a more robust state and federal effort to protect consumers from unreasonable rates. These included incentives for states to enhance their rate review programs, a federal grant program allocating $250 million to support state rate review, and rules for greater rate transparency. At the same time, Congress also envisioned a role for the new health insurance marketplaces, which were created to deliver more affordable health plan options to individuals and small businesses.

Marketplace Plan Management: “Not Your Grandma’s Rate Review

The ACA empowers the marketplaces to be more than just gateways to coverage. At a minimum, each marketplace must exercise authority to assess whether each health plan’s participation is “in the interests of” consumers and employers in the marketplace.

Subsequent federal rules have fleshed out what this means, largely through the critical marketplace “plan management” function. Under the law, plan management includes not just the responsibility to certify qualified health plans, but also to collect and review rate information from participating insurers. (For a comprehensive discussion of marketplace plan management, see CHIR’s 2012 report, Plan Management: Issues for State, Partnership, and Federally Facilitated Health Insurance Exchanges). The ACA requires the Marketplaces to review insurers’ rate increase justifications, before they are implemented, taking into account recommendations from the state DOI regarding such rate increases. Importantly, while the marketplaces are allowed under federal rules to delegate their plan management duties to other state agencies, such as the DOIs, the law requires the marketplaces to retain “ultimate accountability” for the certification and review of participating plans.

The bottom line? The ACA envisions marketplaces that can act on behalf of individuals and small business purchasers – folks who do not have access to a large human resources department that can demand high quality coverage at a more affordable price. However, given the ACA’s heavy investment in state rate review programs, it is unlikely that Congress envisioned marketplaces replacing the role of state DOIs in rate review. Ideally, these agencies will act as partners, working to advance a common vision of better products at a better price for consumers.

 

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