For small business owners and individuals in Delaware concerned with rising health insurance premiums and wondering why rates keep climbing, some transparency is on the way.
A little known provision in President Barack Obama’s healthcare reform initiative included greater accountability when it comes to rate increases, and it kicked in at the start of this month (Sept. 1). The provision, which was part of Patient Protection and Affordable Care Act and is commonly known as “rate review”, mandates that states across the country open up the insurance rate review process to the public and annually review hefty rate hikes.
“For far too long, families and small employers have been at the mercy of insurance rate increases that often put coverage out of their reach. Rate review will shed a bright light on the industry’s behavior and drive market competition to lower costs,” said Kathleen Sebelius, the U.S. Secretary of Health and Human Services, in a statement the day the new provision went into effect.
There are critics on both sides of the fence when it comes to the measure, but for people who have to go out on the open market every year and buy insurance for themselves or their workers, rate review will provide a window into how the process works.Whether it will keep perpetually rising rates from accelerating still remains to be seen.
The Delaware Department of Insurance began posting rate information online in August on its website (click here).
For some states around the country, the new provision has been seen as ineffective because many state insurance commissioners don’t have the legal authority to deny rate hikes. By contrast, Delaware’s Insurance Commissioner Karen Weldin Stewart does have that authority thanks to a law enacted in 2009, said Linda Nemes, spokeswoman and Senior Insurance Research Analyst at the insurance department. “Our law gives the commissioner the authority to disapprove rates as well as approve them,” she said.
That doesn’t mean the First State has the best track record for denying increases.
According to a General Accountability Office report released in July, looking at rate reviews by state, Delaware ended up in the middle of the pack. The study looked at rate filings and those that were disapproved, withdrawn or resulted in lower rates; and last year this occurred in only 33 percent of rate filings in Delaware. By comparison, North Dakota, New York, Connecticut and Utah all had rates of 60 percent or more.
The fact that Delaware has the authority to approve or disapprove rates puts it in a better position than most states, said Carmen Balber, Washington director for advocacy group Consumer Watchdog. But, she maintained, the key is whether or not regulators are exercising their jurisdiction over rate increases enough.
The new provision does not mandate that regulators nix high rate increases, she pointed out; and for rate increases below 10 percent, no review is even necessary.
Another negative of the law, Balber added, is that no detailed justification of a rate increase by an insurer is required. “The insurance companies have to fill out a form explaining why they want an increase but it doesn’t require them to disclose the numbers they are using to come up with that rate increase,” she explained. “So, there is no way to gauge whether they’re fudging the numbers or doing the math right.”
Indeed, the Delaware insurance department’s website does not include any clear explanations from companies on why they need a rate hike, but by the end of this month, the agency plans to include statements with carrier’s filings spelling out “the reasons they’re asking for it,” Nemes said. The agency is also planning on holding public hearings and hosting meetings between insurers and consumers. This will allow consumers, she said, “the opportunity to ask questions and give the carriers an opportunity to explain rate increases.”
But getting answers from insurance companies may still prove to be a hurdle.
Insurers have argued that providing certain data, beyond just rates, may compromise their businesses by divulging company secrets.
“Blue Cross Blue Shield of Delaware (BCBSD) is supportive of initiatives designed to improve overall transparency; however, it is important that BCBSD’s competitively sensitive business information, such as provider contract terms and broker commission rates, remain confidential,” the company said in a statement to DFM News.
The company asked for a 7.3 percent rate hike in the small business market in July that was approved by the insurance department. When asked why the increase was requested, the insurer stated: “Health insurance premiums continue to be driven by underlying medical costs.”
When asked for further details on the increase request, the company provided industry trends but would not release specifics on its own business.
The insurance department’s Nemes said there has been concern from insurance carriers regarding how information is posted. Many, she said, want the information posted in a consistent manner so one doesn’t have an advantage over another.
As part of beefing up the rate review process, Delaware’s insurance agency has been using a $1 million grant that was offered to all states under healthcare reform (45 states and the District of Columbia applied for and received the grant). The funds are being used to buy computer equipment, expand the rate review information online, hold the hearings, and also pay for a consultant to review the whole process and come up with a method to capture statistical information for market analysis, she added.
“We decided to utilize the grant to help bring forward some of transparency that the commissioner had on her agenda,” Nemes maintained.
It’s all about making health insurance more affordable for individuals and small business owners. The average family premium in Delaware last year was $14,671, according to the Kaiser Family Foundation; and a Delaware Department of Health and Social Services report earlier this year cited numbers from the White House Council of Economic Advisors that indicated: “Over the past decade, average annual family premiums for workers at small firms increased by 123 percent, from $5,700 in 1999 to $12,700 in 2009, while the percentage of small firms offering coverage fell from 65 to 59 percent.”
But will this new provision really impact rates?
That’s unclear at this point, said Consumer Watchdog’s Balber. The biggest strength in the new law is that it creates a way to publicly embarrass insurers who will now have to put their rate increase requests out there for all to see.
“It is relying upon health insurance companies to be shamed into doing the right thing,” she explained. “The hope is they’ll be embarrassed enough if rates are found to be excessive and will pull back.”
But she isn’t hopeful. “We’ve seen double digit rate increases year after year, and they are clearly shameless when it comes to profits they’re making on insurance premium.”
