Since the passage of the Patient Protection and Affordable Care Act (ACA), states have been considering multiple ways to update their rate review process, including passing legislation to make their rate review process compliant with the ACA, updating state regulations, and using federal rate review funds to improve existing rate review programs. On May 19, 2011, the U.S. Department of Health and Human Services issued final regulations on rate review and the new federal standards become effective September 1. The agency will determine which states have an adequate review process by July 1, 2011.
The federal rules stipulate that there must be an independent review of any proposed increase of 10 percent or more for most individual and small group health insurance plans. Justification for rate increases above 10 percent must be posted publicly in a consumer-friendly format. Beginning in 2012, the 10 percent threshold will be replaced by thresholds that reflect the insurance and health care cost trends in each state. The final rule also aims to encourage states to develop and upgrade existing technology to streamline data sharing and put information in the hands of consumers more quickly.
Forty-three out of the 50 states had some premium rate review process in place before the health reform law. Some states, including California and New York, passed such laws in the 2010 session. Of the 18 states that introduced legislation to address premium rate increase changes this year, only five passed laws to change their rate review processes.
North Dakota recently passed two new laws that would help the state comply with provisions in the ACA. HB 1125 gives authority to the state insurance commissioner to administer and enforce provisions of the ACA. The law also requires that the commissioner provide updates to the legislature and submit proposed legislation for a special legislative session if needed. In addition, HB 1127 revises its grievances and appeals law to clarify its application to grandfathered health plans under the ACA.
New Mexico’s legislation (SB 208) is aimed at providing greater transparency and giving consumers more input into proposed premium increases beginning in January 2012. The law allows for 30 days of public comment on any rate increase, and it includes new standards in rate review applications as well as new criteria for the state insurance superintendent to use when evaluating whether rates are reasonable.
On May 30, Tennessee (S 1539) passed a law improving the rate review process for small group policies. The state’s new law will strengthen and clarify Tennessee’s rate review statute and ensure the state’s conformity to the federal rule.
Vermont also included rate review provisions in its exchange law (H 65). The law includes a requirement for an electronic mechanism that the public can use to comment on proposed rate increases greater than 5 percent.
On May 11, Washington (H 1220) passed a law that improves the transparency of their rate review process.
Other states that were unsuccessful in passing legislation addressing premium increases are: Arkansas, California (new legislation in addition to the 2010 law), Connecticut, Iowa, Illinois, Kansas, Massachusetts, Montana, Oklahoma, Pennsylvania, Rhode Island, Utah, and West Virginia.
