Regulation of health insurance rates remains a polarizing issue, as evidenced by the outcry last week over Anthem's premium increases in California. While there are pushes in some states toward requirements for justification and transparency, other states have gone in the opposite direction, amounting to a dramatically varied landscape with no clear trend.
Different states with different regs
In the California case, the state's insurance commissioner called Anthem's 8.7% increase on grandfathered individual plans "unjustified and unreasonable" but had no authority to reject it. (Just last fall, 59% of voters rejected a California ballot initiative that would have granted such authority.) Meanwhile, Anthem says the increase is necessary due to the increased costs of pharmaceuticals.
"States have a lot of discretion," says Jesse O'Brien, who directs the Health Insurance Rate Watch Project for the Oregon State Public Interest Research Group.
Some have next to no requirements, while others require companies to file a justification but have no authority to reject the rates, as in California. Some others, like Oregon, do have authority to approve, deny or change rates to be lower or even higher, if they believe a company's proposed rates may be unsustainable, O'Brien says.
"Different states have used these authorities in very different ways," he adds. He counts Oregon as among the most aggressive, with regulators who take a strong stance in scrutinizing rates and have cut an estimated $179 million in health insurance rates for consumers and small businesses since 2010, he says.
In recent years, Oregon has also been a leader in seeking transparency and public awareness through the implementation of a consumer-friendly website and public hearings for every rate increase in the individual and small group markets.
O'Brien also names Rhode Island as an aggressive state for its introduction of standards for how health insurance companies should spend their money, such redirecting more toward primary care.
However, these states are not typical. Not all those that have direct prior approval for rates utilize the authority to a significant degree or provide any public transparency, O'Brien notes.
Impact of the ACA
The ACA has directly involved the federal government in rate review in two ways.
One, it set up the federal rate review program. HHS now requires health insurance companies in the individual and small group market to submit a request for any increase over 10%. HHS then makes a determination as to whether it is justified and makes that determination public. This policy remains an issue.
"Part of the statute is the federal rate review program is supposed to be open to the public but in practice it hasn't really worked out that way so far," O’Brien says. While the HHS does post the rate filing justifications and determinations to its rate review website, it has done so slowly—not in time for the public to see the review before the new rates go into effect, which is counter to the intentions of the advocates who supported it.
There may, however, be movement on that this year, O'Brien says. He notes that advocates in the state of Missouri, which has no rate review program at all, have sued HHS for not making its rate filings public. In response, HHS said it would begin to do so with most rate filings around May 25 this year. However, this has only been said in response to the lawsuit, not in any regulatory guidance, O'Brien notes.
The second way the ACA is impacting rate regulation is through its funding package for state rate review programs, which help states revamp their processes.
"There's been a whole range of things states have done with those funds," O'Brien says.
Oregon used it to set up its rate review website and to implement technology to stream the state's rate review hearings live via the internet—events that actually draw hundreds of online viewers.
The state is also seeking to use some of the grant funds to make use of its All Payer Claims database to help inform its reviews and get insights into insurer processes, such as what resources they are putting toward preventative care, O'Brien says.
No single trend?
Even with the ACA's involvement, the federal government still lacks authority over rates and the states continue to move in individual directions. While some are ramping up their programs, Florida actually ended its effort and Maine significantly curtailed theirs, O'Brien notes.
He adds that it's difficult to gauge the impact of the various regulatory formats on the health insurance industry. In Oregon, he says, some of the concerns were that high levels of transparency would put insurers in a position of shadow pricing or undercutting each other, but that hasn't come to be an issue. "We're still one of the most competitive markets in the country," O'Brien says.
While there is no one trend at this time, the next frontier in rate regulation, in O'Brien’s view, will be efforts like those in Oregon and Rhode Island that involve not only making sure that the justification is sound for rate changes, but using the process to keep insurers accountable for keeping healthcare costs down and providing better care.
"I don’t think there's any state that has figured it out yet and it's going to be very interesting to watch how that develops," O'Brien said.