HHS announces $22 million to help state insurance regulators comply w/ACA provisions

This just in...and it relates directly to my prior post just a couple of hours ago about Alabama finally implementing their own Effective Rate Review program this year. Just moments ago, the HHS Dept. issued this press release:

CMS Announces $22 Million in Affordable Care Act Funding for State Insurance Departments
Awards will help states enforce Affordable Care Act consumer protections

Today, the Centers for Medicare & Medicaid Services (CMS) announced the availability of $22 million in funding to state insurance regulators to use for issuer compliance with Affordable Care Act key consumer protections. This award opportunity enables states to seek funding for activities related to planning and implementing select federal market reforms and consumer protections including: essential health benefits, preventive services, parity in mental health and substance use disorder benefits, appeals processes, and bringing down the cost of health care coverage (also known as medical loss ratio provision).

“These additional grants will continue our partnership with State Departments of Insurance to help support their efforts to ensure their laws, regulations, and procedures are in line with Federal requirements and that States are able to effectively oversee and enforce these provisions under the ACA that provide important consumer protections. In addition, State departments of insurance are vital to the oversight of health insurance plans. These departments are responsible for making sure that premiums are reasonable and justified, ensuring company solvency, and protecting consumers,” said Kevin Counihan, CEO of the Health Marketplace. “Last year, despite headlines of double-digit premium increases, when financial assistance, consumer shopping and aggressive state rate review were factored in, premiums through HealthCare.gov increased just $4 a month for those receiving tax credits. These additional grants will continue our partnership with states to help support their efforts to enforce consumer protections guaranteed by the Affordable Care Act.”

As State commissioners of insurance review proposed rates, they will have a number of important factors to consider. These include medical trend, the end of the temporary reinsurance program, the one-time 2017 moratorium on the Health Insurance Provider Fee, and recent data and policy information which may be accounted for through supplemental filings by issuers. The report on risk adjustment and reinsurance for 2015, which will be issued on June 30, may also affect rates.

Last week, the Department of Health and Human Services (HHS) announced that the Department will make three announcements in June regarding ongoing efforts to: strengthen the risk pool, work with issuers and state insurance regulators, and step up Marketplace outreach, especially to young adults in advance of Open Enrollment 4. Today’s announcement is part of the second step in that process. Last Wednesday, CMS announced a series of actions to strengthen the risk pool, including curbing abuses of short-term insurance plans, improving the risk adjustment program, and beginning the implementation of the special enrollment confirmation process, among other announcements. And last Thursday, HHS hosted an Issuer Innovation Summit to highlight best practices of issuers in attracting, retaining, and improving the health of consumers.

The funding is part of the $250 million in state rate review grants the Affordable Care Act provided to improve the process for how states review proposed health insurance rate increases and hold insurance companies accountable for unjustified hikes. The funds announced today are unobligated rate review grant funding from prior years. In 2015, rate review led to an estimated $1.5 billion in savings for consumers.1 Rate review grant funds not obligated by the end of FY 2014 are available to HHS to issue grants to states for planning and implementing the insurance market reforms and consumer protections.

The Affordable Care Act brought unprecedented transparency into health insurance pricing. Before the Affordable Care Act, insurance companies in many states were able to raise rates without explaining their actions to regulators or the public. Today, the rate review process improves insurer accountability and transparency. It ensures that experts evaluate whether the proposed rate increases are based on reasonable cost assumptions and solid evidence and gives consumers the chance to comment on proposed increases. For example, one way we are improving consumer understanding of the rate review process is by triggering the threshold for review at the plan level instead of the product level. The Affordable Care Act requires that a summary of rate review justifications and results be accessible to the public in an easily understandable format.

Now, it is worth noting that the 2015 Annual Rate Review Report linked to after the "$1.5 billion in savings" footnote above makes no mention whatsoever of other out of pocket expenses to the enrollees such as deductibles or co-pays. Obviously when you bring changes in those costs into the mix, an apples to apples comparison becomes quite a bit more complicated. Having said that, this is still a Good Thing.

I should also note that, given the current debate over different ways of measuring rate increases (such as, for instance, my other post from this morning), the Rate Review report includes this handy tidbit:

Before the enactment of the Affordable Care Act, annual premium increases in the individual market were highly variable and increases often averaged 10 percent or more at the state-level. From 2008 to 2010, the average annual rates of premium increases in the individual market ranged from 9.9 percent to 11.7 percent. In 2010, many increases were in the range of 9 percent to 15 percent, but a full quarter of issuers increased premiums by 15 percent or more. The average annual state-level increase was 10 percent or higher.2

After the enactment of the Affordable Care Act, average rate increases in the individual market moderated to 7.0 percent in 2011 and 7.1 percent in 2012. The average rate increase was 10.3 percent in 2013, but would have been 8.7 percent if the high increases in one outlier state were excluded. This report shows that rate increases have remained moderate since 2013. The average rate increase in the individual market was 2.4 percent in 2014 and 6.9 percent in 2015. In the small group market, the average annual rates of increase were 6.1 percent in 2011, 4.7 percent in 2012 and 7.1 percent in 2013.3 Small group rate increases have also remained moderate since 2013. In the small group market, the average rate increase was 3.6 percent in 2014 and 4.3 percent in 2015.

This answers a question which I've had a partial answer to for some time. On the overall individual market, here's the weighted average premium increase breakdown by year:

  • 2008: 9.9 - 11.7%
  • 2009: 9.9 - 11.7%
  • 2010: 9.9 - 11.7%
  • 2011: 7.0%
  • 2012: 7.1%
  • 2013: 10.3%
    (yeah, I know they mention an outlier, but I don't shrug off outlier states in my estimates, so I'm not gonna let HHS do so here)
  • 2014: 2.4%*
  • 2015: 6.9%**
    (The final average rate hike ended up being 5.6% on average, but that was the effective average rate hike after people shopped around; see below)
  • 2016: 8.0%

*2014 was kind of a special case, however, since that was the first year that all new policies had to be fully ACA-compliant; as a result, there was a sort of "rebooting" of the whole indy market, which HHS properly notes:

...Individual Market 429 issuers submitted 1,130 single risk pool product rate filings for the individual market in 2014. Due to the new insurance market rules discussed above that went into effect in 2014, only 307 of the 1,130 products were renewing (offered in 2013 and in 2014)). Among those filings for renewing products, the average rate increase requested was 2.6 percent and the average implemented was 2.4 percent. We do not provide estimates of individual market premium reductions for CY 2014 because so few filings were for renewing products and such an estimate would only include 20 percent of total filings, which would not accurately reflect the entire individual market.

**2015: A lot of people have asked me how the requested rate hikes compared with the approved hikes last year; here, at last, is the answer:

...The weighted average rate increase implemented for single risk pool coverage was 6.9 percent in the individual market (8.7 percent initially requested) and 4.3 percent in the small group market (5.1 percent initially requested).

OK, so for 2015, it was basically:

  • Requested: 8.7% on average
  • Approved: 6.9% on average
  • Effective: 5.6% on average

For 2016, it was:

For 2017, so far it looks like:

  • Requested: 22%
  • Approved: ??? (won't know this until anywhere from August - November, depending on the state)
  • Effective: ??? (won't know this until next March/April, after the dust settles on the 2017 open enrollment period

In 2015, the final effective average increase ended up being roughly 64% of the requested average. In 2016, the effective increase was around 62% of the requested average.

Assuming this pattern holds (and there's no reason at all to assume that it will, but what the hell), it suggests that the 2017 rates will end up averaging something like 18% approved and 14% effective once the dust settles next spring.

Stay tuned...