ACA addresses our long history of premium rate hikes

Now that the Affordable Care Act’s first open enrollment period is behind us, the healthcare world is waiting to see what will happen with health insurance premium rates for 2015. The latest attempt at ginning up outrage over Obamacare has involved making wild predictions about premium rates going through the roof because of the law.

Many pundits are quick to point to the Affordable Care Act as the reason for any change in health insurance premiums. What isn’t mentioned in these predictions? Large increases in premiums aren’t new. There is a long history of significant rate increases, even double-digit rate increases in the individual market.

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In fact, there was enough concern about the steep rise in premium rates before the law was passed that the Affordable Care Act includes provisions to strengthen states’ oversight of premium rates, and it gives the Department of Health and Human Services (HHS) the authority to review premium rate increases that are potentially “unreasonable.”  

The Affordable Care Act is grounded in transparency. Federal regulations require that rate filings be made public.  However, HHS has yet to follow through on its promise of making this information available to the public. In fact, HHS has only recently made available rate filing information dating back to 2013 for the 2014 plan year. And though many states also require full disclosure of rate filings, the level of required transparency varies drastically.

That’s why Consumers Union and Families USA, joined by nearly 70 other groups from across the country, are urging newly confirmed HHS Secretary Burwell to make releasing this information a top priority. This will allow outside groups like us to evaluate the proposed rates and weigh in on whether they are justified. We also urge states to take seriously their responsibility to review premium rates and reject increases that are unreasonable.

Extreme increases should draw outrage. Regulators must carefully scrutinize premium increases to determine whether insurers are properly forecasting their expenses, controlling costs, and considering whether their proposed rates are affordable.

But it’s hard to fight what you don’t know. Whether a rate increase is large or small, we can’t know if it’s justified without looking at the underlying data the rate is based on. Case in point: One Midwestern state official recently tried to twist the facts regarding newly filed rate increases, spinning the math to tout double-digit rate hikes. But when third party experts reviewed the rate filings more closely, they easily found that the rate filings amounted to single-digit increases for most consumers.

Unfortunately, insurance companies routinely claim that a substantial amount of information in their rate filings is a trade secret or confidential.  As a result, in many states, the insurer's justification for its proposed rates is unavailable. This makes it difficult, if not impossible, to judge whether the proposed increase is justified. Insurers are allowed to hide this information even though experiences in states like Oregon show that revealing the complete justification for rate increases has produced robust, competitive insurance markets.

In addition to this problem, when insurers are deciding what premium rates to charge, they are essentially making a wide range of best guesses. And insurers can make faulty assumptions. When this happens, policyholders can end up paying unjustifiably high rates. That’s why rate disclosure is critical now, before rates are finalized and revealed to policyholders.

When regulators are attempting to strike a balance between publicly releasing rate filing information and the commercial interests of the health insurance industry, they should decide in favor of public disclosure.

Making good on the Affordable Care Act’s promise to make premium rate increases more transparent is critical to controlling health care costs and preventing insurers from taking the easy way out and joining the chorus of the Obamacare blame game.

Otherwise, we’ll never move past the political theater whose goal is to score points—not to give states and consumers the clear, unbiased information they need.

Friedholm is director of Health Reform for Consumers Union, the policy and advocacy division of Consumer Reports. Fish-Parcham is the Private Insurance Program director of Families USA, the national organization for health care consumers.