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HHS Says Rate Review Saved Consumers $1.2 Billion in 2012

By CQ Staff

September 12, 2013 -- Insurers were less likely to seek health premium increases greater than 10 percent in 2012 because of the provision in the health overhaul law that requires them to justify such requests, explanations that are then publicly posted for consumers to see, according to a recently released federal report.

The second annual rate review report from the Department of Health and Human Services (HHS) says that 6.8 million consumers with insurance in the individual and small group markets saved an estimated $1.2 billion on health insurance premiums in 2012 because of the overhaul's rate review provision. The health law (PL 111-0148, PL 111-152) also provides for $250 million in grants to state insurance departments for fiscal years 2010 through 2014 to help them beef up their rate review activities.

According to the report, the average rate request increase in the individual market dropped by 12 percent (from 8.1 percent to 7.1 percent) after rate review, saving consumers an estimated $311 million. And in the small group market, the average rate increase request declined by 19 percent (from 5.8 percent to 4.7 percent), saving consumers an estimated $866 million after rate review.

In 2012, 26 percent of requests for rate increases in the individual market were for an increase of 10 percent or more, significantly lower than the 43 percent requested in 2011, the report said.

Because insurance regulation is vested in the states, it varies from state to state whether insurance commissioners have the power to stop an insurer from increasing their premiums. But the theory behind the rate review provision was that insurers would be deterred from filing huge rate increases if they had to explain why they were planning rate increases above 10 percent and if state insurance regulators also would post an online notation when they believed an increase was unreasonable.

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