HRI regulatory spotlight

Health Research Institute
Regulatory Spotlight
pwc.com/hri
January 2015
States use rate approval authority to manage individual health
insurance premium prices for 2015
The individual health insurance market has received much attention as
consumers enroll in plans for 2015. In the months leading up to the 2015 open
enrollment period, PwC’s Health Research Institute (HRI) analyzed insurers’ rate
filings and found that premium increases over 2014 varied widely from state to
state. Although the ACA helped standardize states’ programs to review rate
filings, not all state insurance commissioners have the same authority to modify
proposed rate increases. HRI analysis indicates that insurers in states with
approval authority saw a greater reduction between proposed and final rate
increases for 2015 compared to insurers in states without this authority.
Impact of rate regulation on 2015 premiums
HRI analyzed proposed and approved rate filings from 25 states and the District
of Columbia for on- and off-exchange products offered in 2014 that were re-filed
for 2015. States with prior approval authority saw a median drop of 2.9
percentage points between the proposed and approved rates, whereas carriers’
rates in file and use states dropped less than half as much, with a median 1.3
percentage point decrease. Of the 223 rate filings included in this analysis, almost
half were modified prior to approval. Carriers’ proposed rates in states with prior
approval authority were more likely to be modified (51%) than those in states that
do not have this authority (23%). In addition, the median approved rate increase
for 2015 in states with prior approval authority (6.0%) was lower than that in
states without it (6.6%).
Factors influencing proposed premium changes
Many factors influence premium prices, and with only one year of comparative
data for the ACA’s individual plans, it is too early to determine a “trend.”
Nonetheless, early data suggest prior approval authority does exert downward
pressure on insurance costs for several reasons.
 State regulation of rate filings: States with approval authority often rejected
large premium increases. For example, carriers re-filing 2014 products in one
mid-Atlantic state saw an average decrease of 10.6% between their proposed
average premium increases and those approved by the state insurance
commissioner.
 Disclosure and transparency standards: As part of the ACA, insurers seeking
rate increases of 10% or more for non-grandfathered policies are required to
publicly disclose the proposed increases and the justification for them on their
websites. Such increases are then reviewed by independent experts to
determine whether they are unreasonable. The goal of these requirements is to
help consumers understand why they face higher rates.
 Competitive pressures: In some states, health insurance companies may review
one another’s rate filings, enabling them to adjust for competitive reasons
before finalizing.
Conclusion
HRI’s analysis continues to support findings that overall median percentage
premium increases for the 2015 individual health insurance market hover
around 5.5%, contrary to initial fears about rate hikes in the double-digits.
While future years’ data are needed to confirm the effect of rate approval
authority on year-over-year premium changes, it is likely that premium prices
will stabilize as health insurers gain more experience with the new exchange
market, its regulatory requirements, and the demographics of its consumers.
At a glance
States that have the power to approve
and deny health insurance carriers’
proposed premiums are using their
authority to hold down premium
increases in the 2015 individual health
insurance market.
Types of rate approval authority:
 Prior approval (33 states + DC) - A
rate or rate change must be approved
by the insurance department before
an insurer can implement it.
 File & use (12 states) - New and
proposed rate changes must be filed
with the department of insurance, but
insurers do not need formal approval
before implementing them.
 Both (3 states) - Some states have
prior approval authority only for
certain types of insurers, such as
HMOs, and rely on file & use for all
other insurers.
 Not required (2 states) - Missouri
and Montana do not require rate
filings.
Contacts
Benjamin Isgur (Director)
[email protected]
(214) 754-5091
Bobby Clark (Pharma/Life Sciences)
[email protected]
(202) 312-7947
Matthew DoBias (Provider)
[email protected]
(202) 312-7946
Laura McLaughlin (Payer)
[email protected]
(203) 233-6041
Katy Lewandowski (Analyst)
[email protected]
(202) 412-1013
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