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Consumer group recommends more effective scrutiny of health insurance rate increases

Diane E. Brown

This month, health insurance rate increases become effective – ranging from Blue Cross Blue Shield of Arizona with a 10.9 percent average annual increase impacting 67,248 individuals, to Aetna Small Group with a 14.1 percent increase impacting 46,916 individuals.

Working with an actuary in Arizona, the Arizona PIRG Education Fund reviewed these and other increases to highlight any positive or negative trends that may impact the cost of health care for Arizonans.

In “A Glimpse into Arizona’s Health Insurance Rate Review Program,” an initial analysis is provided on how effectively Arizona is reviewing proposed health insurance rate increases for the individual market since taking over that responsibility from the federal government.

Under the Patient Protection and Affordable Care Act (ACA), any proposed premium health insurance rate increase of 10 percent or greater needs to be reviewed.

While the Arizona Department of Insurance (ADOI) can protect consumers by carefully examining proposed health insurance rate increases and operating in a transparent manner, to prevent rate shock ADOI needs the authority from the state to deny unreasonable rate hikes.

Overall, ADOI deserves credit for encouraging stakeholders to offer suggestions to improve transparency of the filings and the rate review process, alerting interested parties when an applicable rate increase is filed and has been determined, and being responsive to inquiries on the rate process and on specific filings.

However, information about proposed health insurance rate increases is difficult to find on the ADOI website. In particular, it is challenging to access the actual rate filing. And supplemental information, such as documents from the insurer in response to a question from ADOI, does not appear to be publicly available.

Furthermore, insurers appear to have not provided the public with sufficient information to justify their proposed rate increase and the underlying assumptions, particularly in the case of the insurers’ projected medical costs. And insurers are currently not required to show that proposed rate increases are based on reasonable administrative costs and are not required to explain what they are doing to reduce rising medical costs in ways that improve quality.

Based on assessment of the rate filings, the Arizona PIRG Education Fund recommends that ADOI conduct the following to strengthen the effectiveness of our state’s health insurance rate review process:

1. Further expand transparency. Make the filings easier to locate on the ADOI website and make supplemental filing documents publicly available.

2. Require insurers to thoroughly justify rate increase proposals. The justification should include the data and calculations necessary to evaluate their proposal as well as reasonable administrative costs and a strategy to lower health care costs. ADOI should then carefully scrutinize each of the insurers’ justifications.

3. Request and advocate for authority to deny rate increases that are unjustified or unreasonable to better protect individual consumers and small businesses from excessive rate increases. More than 30 other states, including New Mexico, Nevada and Colorado, already have prior approval authority for at least some insurance products. Arizonans deserve the same protections.

— Diane E. Brown is the executive director of the Arizona PIRG Education Fund, which conducts research on public interest issues.

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