Rate review programs reduce healthcare premiums by $993M
By - The US Department of Health & Human Services’ (HHS) Rate Review Program and Rate Review Grant Program have shown success since their implementations in 2011 and 2010, respectively. Combined, the two programs have reduced total premiums by an estimated $290 million in the individual market for all states, according to a recent HHS report. Additionally, it is estimated that the programs reduced premiums in the individual and small market groups for 2013 by approximately $1 billion ($993 million).
The Rate Review Program and the Rate Review Grant Program were results of the Affordable Care Act and were designed to be protections for consumers who purchase health insurance coverage in the individual and small group markets, HHS said in its report.
“The Rate Review Program requires issuers to submit for review by HHS and/or the relevant state any proposed rate increase of 10 percent or more and to justify that increase,” HHS explained. “Through the Rate Review Grant Program, the Department of Health and Human Services (HHS) is providing $250 million in grants to states over 5 years to improve their rate review capabilities.”
For its Rate Review Annual Report for Calendar Year 2013, HHS analyzed data from 40 states in the individual market and 37 states in the small group market to estimate the impact of the Rate Review Program and the Rate Review Grant Program on premiums in the individual and small group markets.
The report showed that in the individual market, the average requested rate increase was reduced by 8 percent for the 40 states examined. In the small group market for all states, Rate review reduced total premiums by an estimated $703 million and the average requested rate increase was reduced by 11 percent for the 37 states examined.
“While the average premium increased more in 2013 than in prior years, it was still less than typical growth prior to the Affordable Care Act,” the report stated. “Consumers nevertheless benefited from an estimated reduction in premiums of nearly $1.0 billion ($290 million in the individual market and $703 million in the small group market).”
The report also discussed the Medical Loss Ratio (MLR) requirement (also known as the “80/20 rule”). The MLR provision states that insurance companies in the individual and small group markets must spend at least 80 percent of their collected premiums on claims payments and quality improvement activities or make rebates to consumers.
When the 2013 MLR rebates of $250 million for the individual and small group markets were combined with the savings in the rate programs, the total savings for consumers in 2013 added up to $1.2 billion, according to the report. Moreover, in 2012 the Affordable Care Act’s MLR and rate review provisions accounted for $1.6 billion in rebates and premium reductions. The combined amount of rebates and reduction in premium amounts for 2013 and 2012 was $2.8 billion.
“This data will substantially improve the ability to review rate impacts on the market as a whole, compare rates across issuers, and monitor changes over time,” HHS wrote.“Using both historic and new filing and review methods, HHS will continue to monitor the long-term trend of requested and implemented rate increases in the health insurance market.”
