In 2011, two provisions of the ACA that relate to the review of health care insurance policy rates went into effect. First, starting at the beginning of the plan year, if carriers in the small group and individual markets had medical loss ratios below 0.80, a provision required carriers to rebate the “excess” to subscribers. Second, beginning on September 1, carriers with premium increases of 10 percent or more in 2011 and 2012 were to submit justification for those increases to state and/or federal regulators. In addition, 35 and 30 states now have prior approval authority in the individual and small group insurance markets, respectively. Prior approval requires insurance department approval before new premium rates go into effect.
To analyze trends in pre- and post-ACA premiums, this study examined publicly available data from 2011 and 2012 and presented findings alongside findings from NORC’s earlier study for ASPE, “Trends in Premiums in the Small Group and Individual Insurance Markets, 2008-2011.” NORC extracted data from 24 states that were included in the Trends study that had public websites, and five additional states that were not included in the Trends study but that had public websites.
In calculating state and national averages, we have used separate weights for the small group and individual markets that reflect enrollment in the plan and carrier. Composite weights for each state are based on the estimated number of persons with coverage in the small group and individual market. Our analyses examine trends in two critical measures – premium increases and approval of rates by state regulators -- in the periods before and after the ACA rate review provisions went into effect.
Our major finding is that premium increases slowed substantially since the time that ACA rate regulations went into effect in 2011 compared to the prior period in the states included in this research. In the Individual market, premium increases fell from 11.7 percent in 2010 to 7.1 percent in 2012. In the small group market, premium increases declined from 8.8 percent in 2010 to 4.8 percent in 2012. In both the individual and small group markets, premium increases for each post-rate review period were lower than for any pre-rate review period.
The slowing of premium increases has two dimensions. First, insurers’ requested smaller premium rate increases in both individual and small group markets. Second, regulators reduced requested premiums of insurers more extensively after ACA rate review provisions went into effect. In 2012 state regulators approved about 83.6 percent of rate requests in the individual and 73.2 percent in the small group market, but the average reduction in requested premiums was 12.7 and 23.9 percent respectively. In the pre-rate review years, data from the Trends study shows rate reductions were never as much as 10 percent in the small group market. In the individual market, rate reductions of 10 percent or more occurred only in 2010. Over the period of the two studies, the number of filings in the study sample grew continuously in the small group market from 124 in 2008 to 569 in 2012. In the individual market the number of filings collected varied significantly from year to year, with 395 found for 2012; these fluctuations occurred on the level of individual states.