Rate Review 2.0: The Next Generation

Last week the Administration released its final rule implementing the sweeping health insurance reforms that will change the way people access and experience private coverage. Often referred to collectively as the “2014 market reforms,” these new protections include, for example, the ACA’s guaranteed issue and renewal requirements, which prohibit insurers from denying people coverage – or refusing to renew their coverage – based on their health risk. And they include the new, modified community rating rules, which allow insurers to adjust people’s premium rates based only on their age, tobacco use, geographic location, and family size, which have generated some controversy, particularly around the law’s 3:1 age rating requirement. These reforms, along with new insurance marketplaces to help people shop for coverage and the tax credits to help people pay for it, are critical to the ACA’s goal of expanding coverage to the uninsured.

However, equally important – but receiving less attention – are the mechanisms federal and state regulators will use to hold insurers accountable and ensure people receive the full range of protections they have been promised. The final rule on the 2014 market reforms includes important new provisions that will help support the oversight and enforcement that will be necessary for the next generation of the federal and state rate review programs. All this is in addition to the state rate review expansions and improvements made possible by the ACA.

The final rule includes the following critical elements:

  • It requires that insurers submit data and documentation (called a Rate Filing Justification) regarding all rate increases, not just those above the 10% threshold established under HHS’ 2010 rate review regulation.
  • Insurers must submit the Rate Filing Justification to HHS (via the Centers for Medicare and Medicaid Services (CMS)) and, if the state accepts it, to the state department of insurance.
  • As part of the Rate Filing Justification, insurers must use an expanded version of the standardized, “unified rate review template” that they currently use to submit data on rate increases that are 10% or above. The template includes data on claims projections, utilization and cost assumptions and other key elements underpinning the proposed rate.
  • It requires that, for a state to maintain its status as an effective rate review program, state departments of insurance must add to their review of insurers’ filings the following:
    • The reasonableness of an insurer’s assumptions about the impact of the reinsurance and risk adjustment programs; and
    • Insurers’ data relating to the implementation and use of a market-wide single risk pool, the essential health benefits requirement, the actuarial value of their products, and the other market reform provisions of the ACA.

HHS intends to use the information about insurers’ premium rate increases to monitor adverse selection inside and outside the health insurance exchanges, a duty it holds under the law. And the rule clearly intends to provide incentives for state departments of insurance to expand the scope and depth of their rate review efforts.

In addition, as part of the final rule, the agency rejected insurers’ concerns about public disclosure of their rate information, noting “we believe that public disclosure of certain rate review information will not undermine competitive market dynamics.” This is good news for consumers, as it may perhaps be sunshine on insurers’ rate increases that will do the most to ensure compliance with the law – and help educate policymakers and the public about the drivers of rate increases.

Follow news about the Administration’s ACA rulemaking – and more – here at CHIRblog!

The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.