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Thursday, May 15, 2014

Challenging Health Insurance Premium Rate Increases: Part 2 - First Steps after Proposed Premium Rates Come Out

Kathleen Stoll

Director of Health Policy

This is the second blog in our series that shares tips and best practices from consumer advocates in several states about how to effectively participate in the health insurance rate review process. The rest of the series covers:

Part 1: How to prepare for rate review 
Part 3: How to critique insurers’ assumptions about future medical costs
Part 4: Challenging the amounts insurers keep on hand for administrative expenses, reserves, and surpluses
Part 5: Involving consumers in the rate review process

This blog provides first steps for advocates after rate increases are proposed. 

What you’ll learn from this post: How to determine which rate filings to review and whether to use outside expertise (a health insurance actuary)

This spring, health insurers will file proposed premium rates for many different products. State consumer advocacy organizations can play an important role in preserving the affordability of health insurance and bringing transparency to the rate review process. However, most organizations do not have the capacity to review every rate filing in a state and may wonder whether outside expertise is necessary.

Prioritize which health insurer rate filings to examine

By challenging the review of even a couple of insurance rate filings, you can call attention to the process, generate media attention, and motivate the state insurance department (or other regulator) to look more closely at these and other filings.

Establish priorities for which proposed premium increases to review, such as those that meet these criteria:

  1. “Outlier” rate increases – health plans requesting much higher rates than others in the same market.
  2. Patterns of steep premium hikes – health plans that have asked for large increases for several years in a row.
  3. Large market-share – health plans with a large number of enrollees who would be hurt by a high premium. 
In 2013, OSPIRG in Oregon reviewed an insurer’s filing if it asked for a premium increase of more than 5 percent and/or affected more than 10,000 people.

Consulting an actuary

Actuaries are professionals with backgrounds in math, statistics, and financial analysis who forecast financial risk. Health insurance companies use actuaries to help them predict future medical costs when they propose their premium rates, and regulators use other actuaries to review the insurers’ assumptions.

Some consumer advocacy organizations contract with an independent actuary to scrutinize a rate filing with consumers’ interests in mind. They have used their state’s Affordable Care Act rate review grants or raised money from foundations to contract with an actuary.

The advocates we interviewed all agree that an actuary can be extremely helpful in dissecting a rate filing. In several states (California, Maine, Oregon, and Vermont) consumer advocates receive funding to contract with an actuary through their state’s Affordable Care Act rate review grants. Other organizations have raised funds to contract with an actuary (e.g., Colorado Consumer Health Initiative).

Influencing the review process without an actuary

Even without your own actuary, you can get information by contacting an actuary who works for the state. For instance, Vermont Legal Aid serves as the state’s Office of the Health Care Advocate. Under Vermont law, it can represent consumer interests in a rate filing and submit suggested questions to the state’s contracted actuary. In Connecticut, the state’s exchange board has its own independent actuary under contract to approve rate filings as part of its duty to represent consumers. While the Insurance Department has final authority over rates, this outside scrutiny by the board has made a difference by setting a higher bar for all rate filing reviews.

Without an independent actuary, you can still make an impact by asking good questions and explaining how consumers will fare if rates increase. While rate review issues can be technical, advocates around the country have been able to influence the rate review process without consulting an actuary. 

Our next post covers how you can critique assumptions about medical cost trends that insurers use to justify rate increases.

What you learn about rate review can help other advocates—share your strategies with us on Twitter and Facebook.

If you have tips or best practices to share, other advocates are waiting to hear from you! Please share your strategies with us through Facebook or Twitter using #ratereview2015.