A recently released report by the Kaiser Family Foundation suggests that federal oversight through health care reform has led to lower insurance rate increases. Under the Affordable Care Act (the Act), as of Sept. 1, 2011, all insurers in the small group and individual market are subject to rate reviews by their state for requests of increases of at least 10 percent. Currently, the Department of Health and Human Services (HHS) conducts reviews for six states that they have determined do not have an effective rate review program in place. According to the report, one in every five requests by a health insurer for a rate increase in 2011 resulted in a lower increase or no increase in all. Average approved rate increases were 1.4 percentage points lower than insurers initially requested.
Generally, issues related to insurance regulation fall under the jurisdiction of state governments. In fact, while rate increases have been lower after the Act mandated reviews took effect, the federal government has no authority to prevent insurers from implementing rates that are deemed “unreasonable.” The Act merely requires that insurers publish proposed increases of 10 percent or more on an HHS website dedicated to the implementation of the Act. However, most states do have the authority to reject unreasonable premium increases. Since the passage of the Act, the number of states with the authority to reject increases determined to be unjustified increased from 30 to 37.
The report notes that one of the main rationales behind rate reviews is the hope that it will promote accountability among both health insurers and regulators and also lead to public awareness of rate increases. However, as the report only tracked data for 2011, the first year after the rate review rules took effect, the long-term impact of these rate reviews has yet to be seen. In fact, the report itself admitted that while “regulators may be able to exert pressure on insurers to control costs more aggressively, rate review itself cannot alter the factors driving increases in health care costs (such as the underlying prices charged by doctors and hospitals, the amount of health care utilized by enrollees, and new medical technologies).”