Last September, after the Patient Protection and Affordable Care Act gave the Department of Health and Human Services authority to review premium rates in states that didn't have strong enough review programs, the agency began handing down decrees of "unreasonable" premium rates for insurers that proposed increasing rates by an average of 10% or more - meaning HHS can publically shame an insurer.
"HHS and states are really coming down hard on just about any carrier, which is creating a lot of angst at the carrier level and hand wringing. HHS seems very proud of it; so, this is a hot topic [among] insurance carriers and state-level bureaucrats," says Alan Cohen, chief strategy officer and co-founder of Liazon, a private health insurance exchange that serves mainly small employers. "But, in another realm where benefits managers live, this is a nonevent; they're not paying attention. Maybe they read it in the newspaper, but what matters to them is what the effect will be to their renewal." Cohen says that, depending on the size of the employer, rate increases may differ. Even if an employer is going with one insurer who is increasing rates, the company may not be any better off with another carrier.
Reviews politically motivated
Others experts think that the HHS reviews are politically motivated.
"Benefits managers don't pay attention to regulatory squabbles as rates are filed and improved," says Mike Turpin, executive vice president of USI, an insurance and financial services broker. "And I think they're getting conditioned [to] health care reform politics. They're not as enraged; they're kind of numb to it."
Further, employers may empathize with insurers, says Steven Friedman, chair of the employee benefits practice at Littler Mendelson. More than 13.5 million people now have health savings accounts comple- menting high-deductible health plans, according to the 2012 HSA Census by America's Health Insurance Plans.
"Employers often see themselves on the same side of the insurance companies in terms of trying to limit costs for participants covered under health plans," Friedman says. "The increases in annual premiums are viewed as industrywide phenomena, and employers will annually bid for the best coverage that is the most cost-efficient. I'm not sure the insurers are being tarred by the employers, because health care costs seem to rise universally."
Rate review offers transparency
PPACA requires states to report on trends in premium increases and recommend whether certain plans should be excluded from health insurance exchanges beginning in 2014, based on unjustified premium increases. HHS also may make that decision in states where rate review programs lack sufficient strength. Small employers in public exchanges will be able to see upfront which companies have been flagged for "unreasonable" hikes and be able to go to another insurer.
"[PPACA's] rate review policies bring an unprecedented level of scrutiny and transparency to health insurance rate increases. They ensure that, in every state, every proposed increase of 10% or more is evaluated by independent experts to assess whether they are based on reasonable assumptions and sound data," a CMS spokesperson tells EBN. "Rate review is expected to help moderate premium increases and provide consumers and employers with greater value for their premium dollar. Additionally, health insurance companies must provide easy-to-understand information to their customers about their reasons for significant rate increases, as well as publicly justify and post on their website any unreasonable rate increases. These protections allow consumers and employers in every state to learn more about their insurance premiums. All of this information is available at companyprofiles.healthcare.gov."
"Thanks to the Affordable Care Act, consumers are no longer in the dark about their health insurance premiums," said HHS Secretary Sebelius in a press release earlier this year. "It's time for these companies to immediately rescind these unreasonable rate hikes, issue refunds to consumers or publicly explain their refusal to do so."
However, industry groups say that it's not premium hikes that are driving up costs, but underlying medical and administrative costs. "New medical technologies that have high costs associated, new benefit mandates - all of those will drive up the cost, which is where the focus should be," says Robert Zirkelbach, press secretary for AHIP. He says the focus should be on providers, as opposed to insurers. "You saw this during reform, when [the debate] focus was on premiums and largely ignored cost drivers. If you want to bring down the cost, then that's where they lie."
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