Academic journal article Inquiry

Republican States Bolstered Their Health Insurance Rate Review Programs Using Incentives from the Affordable Care Act

Academic journal article Inquiry

Republican States Bolstered Their Health Insurance Rate Review Programs Using Incentives from the Affordable Care Act

Article excerpt

Abstract

The Affordable Care Act (ACA) included financial and regulatory incentives and goals for states to bolster their health insurance rate review programs, increase their anticipated loss ratio requirements, expand Medicaid, and establish state-based exchanges. We grouped states by political party control and compared their reactions across these policy goals. To identify changes in states' rate review programs and anticipated loss ratio requirements in the individual and small group markets since the ACA's enactment, we conducted legal research and contacted each state's insurance regulator. We linked rate review program changes to the Centers for Medicare and Medicaid Services' (CMS) criteria for an effective rate review program. We found, of states that did not meet CMS's criteria when the ACA was enacted, most made changes to meet those criteria, including Republican-controlled states, which generally oppose the ACA. This finding is likely the result of the relatively low administrative burden associated with reviewing health insurance rates and the fact that doing so prevents federal intervention in rate review. However, Republican-controlled states were less likely than non-Republican-controlled states to increase their anticipated loss ratio requirements to align with the federal retrospective medical loss ratio requirement, expand Medicaid, and establish state-based exchanges, because of their general opposition to the ACA. We conclude that federal incentives for states to strengthen their health insurance rate review programs were more effective than the incentives for states to adopt other insurance-related policy goals of the ACA.

Keywords

health care reform, Affordable Care Act, health insurance rate review, policy implementation, federalism, politics

Introduction

The Affordable Care Act (ACA) sought to increase access to more affordable health insurance through a number of provisions. It expanded Medicaid eligibility and provided premium tax credits to households with incomes between 100% and 400% of the federal poverty level that purchased insurance within the ACA's newly established health insurance exchanges (or marketplaces). These provisions increased access to insurance; however, that access is unaffordable to many individuals and small employers because of rising health insurance premiums. (1)

To try to reduce the health insurance premium growth, some stakeholders wanted the ACA to give the federal government the authority to reject proposed health insurance rate increases determined to be unreasonable. But in the end, policymakers compromised by including incentives to strengthen states' health insurance rate review programs and by establishing a federal medical loss ratio requirement. Since the ACA's enactment, the Centers for Medicare and Medicaid Services (CMS) has made annual and ad hoc evaluations to determine whether each state's rate review program is effective. (2-5) CMS bases its determination on whether the state (1) receives sufficient data and documentation to determine the reasonableness of the proposed rate increase (whereby the rate is the unit price of insurance, and the premium is based on the rate coupled with the benefit design and allowable rating factors, such as age, geography, family composition, and tobacco use); (2) conducts a timely review that considers changes in factors such as medical cost, utilization, benefits, and cost sharing; and (3) bases its determination of the reasonableness of rate increases on a standard that is set forth in state statute or regulation. (6) Beginning September 1, 2011, in the individual and small group markets, non-grandfathered health insurance annualized rate increases of 10% or more must either be reviewed by the state or CMS for reasonableness. States with an effective rate review program conduct the review and make this determination, but CMS plays this role for states with ineffective rate review programs. …

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