Effects of Implementing State Insurance Market Reform, 2011-2012. Trends Before and After the Start of “Unreasonable” Rate Review

06/07/2013

As of September 1, 2011, rate increase requests of 10 percent or more are shared with the Center for Consumer Information and Insurance Oversight (CCIIO), which is a part of DHHS, as part of the “unreasonable” rate review program.37 In addition to being reviewed by state or federal regulators, these filings are made available to the public through an online portal (healthcare.gov). We used the data collected from this study to compare rate increases and approval rates during the times periods before and immediately after the implementation of reasonable rate review.

We analyzed all the filings in our study that had rate modifications to see if filings that met the threshold for public disclosure, with a proposed rate increase of 10 percent or more, were subject to a larger percentage of modifications by state regulators than those that did not. While in general, larger requested rate increases should be more likely to be modified because they will draw greater scrutiny, the public disclosure of the larger-magnitude rate filings may cause carriers and regulators to treat publiclydisclosed filings differently. Of course an increase in reviews and modifications by state regulators may also be due to increased regulatory activity overall, as funded by the Cycle I and II rate review grants (also described in the Introduction) or by other factors not addressed in our analysis.

In the individual market (Table 36), filings with a requested increase of greater than 10 percent in both 2011 and 2012 were modified significantly more often than those with a requested rate increase of less than 10 percent. In 2011, 34.5 percent of filings with requested rates above 10 percent were modified, compared to only 18.3 percent of requested rates below 10 percent. This difference was even more apparent in 2012, with 42.1 percent of all requested rates above 10 percent modified, compared to only 20.2 percent of requested rates below 10 percent.

Table 36: Percentage of Filings with Rate Modifications, for Filings in which the Proposed Rate Increase was Greater than or Equal to 10%, Individual/Conversion

Requested Rate SMR 2011 SMR 2012
Less Than 10% 18.3% 20.2%
Greater Than / Equal to 10% 34.5%* 42.1%*

* Estimate is significantly different from filings with a requested rate of less than 10% at p < .05.
Calculated based on the subset of filings with complete rate information – both proposed and approved premium increases

In the small group market (Table 37), a significant difference in rate modifications was found between filings requesting an increase greater than 10 percent and those that requested an increase of less than 10 percent in both 2011 and 2012. While both years showed a significant difference, this difference was much larger in 2012. In 2011, 15.4 percent of filings with requested rates above 10 percent were modified, compared to 8.4 percent of requested rates below 10 percent. In 2012 78.5 percent of all filings with a requested rate increase of greater than 10 percent were modified in 2012, compared to only 11.7 percent of those that had a request of less than 10 percent.

Table 37: Percentage of Filings with Rate Modifications, for Filings in which the Proposed Rate Increase was Greater than or Equal to 10%, Small Group

Requested Rate SMR 2011 SMR 2012
Less Than 10% 8.4% 11.7%
Greater Than / Equal to 10% 15.4%* 78.5%*

* Estimate is significantly different from filings with a requested rate of less than 10% at p < .05.
Calculated based on the subset of filings with complete rate information – both proposed and approved premium increases

Another approach to analyzing before and after implementation of the new rules on public disclosure and “excessive” rate review is to compare all filings submitted before the September 1, 2011 deadline with all those submitted after. The estimates in the remainder of this section are not directly comparable to others in this report – because the September 1 cutoff applies based on when a filing is submitted, rather than the date it takes effect, the year with which a filing is associated in the rest of the report (based on the effective date) is not necessarily how it will be identified for the purposes of this analysis. Note that few filings appear in the last months of 2012 because of the delay between when a filing is initially submitted and when it takes effect – most filings submitted in October 2012 and later take effect in early 2013, and are outside the scope of this study. Additionally, 362 filings in the data set are missing a value for the date submitted to the state, and are omitted from this analysis. While these filings have other dating information roughly contemporaneous with submission date, such as the date they were approved or went into effect, this analysis is concerned with behavior around a specific cut-point, and so classifying these filings by assumption could introduce error into our calculations.

Table 38 presents the number of filings that had a proposed rate that were submitted during each month of the study. The table also denotes the number of filings per month based on whether the proposed rate (as opposed to the final implemented rate) was greater than or less than 10 percent. There is a clear increase in activity during August 2011, just prior to the beginning of public rate review and disclosure, as more filings were submitted in that month than any other during the study period. Additionally, rate filings requesting an increase of 10 percent or more comprise 39.5 percent of the filings submitted prior to the deadline (103 of 261) and just 20.2 percent of those submitted after (50 of 248).

Table 38: Number of Filings Submitted, in which the Proposed Rate Increase was Greater than or Equal to 10%, by Month, Individual/Conversion

Month Individual, less than 10% Individual, 10% or more All Individual Filings
2010 July . 18 18
2010 August 5 3 8
2010 September 6 5 11
2010 October 17 10 27
2010 November 7 6 13
2010 December 5 4 9
2011 January 7 2 9
2011 February 9 10 19
2011 March 19 11 30
2011 April 26 5 31
2011 May 15 6 21
2011 June 17 18 35
2011 July 18 12 30
2011 August **47 **39 **86
2011 September 16 . 16
2011 October 21 3 24
2011 November 11 3 14
2011 December 12 4 16
2012 January 21 2 23
2012 February 19 1 20
2012 March 22 4 26
2012 April 21 14 35
2012 May 19 1 20
2012 June 15 6 21
2012 July 10 4 14
2012 August 6 3 9
2012 September 2 3 5
2012 October 3 2 5
2012 November . . .
2012 December . . .

Note: Month and year designation is determined by the date the filing was filed by the carrier (and not the effective date of the filing).
Cells highlighted in blue** indicate the month when the greatest number of filings was submitted.

Table 39 examines the same rate for the small group market. Any effect of the deadline for the excessive rate review program is hard to discern from this data. While 56 filings were submitted in August 2011 as compared with September, 61 filings were submitted in October 2011, and there is more month-to-month variation generally. Similarly, the ratio of filings requesting larger-magnitude increases to all submitted filings is roughly the same for filings submitted before and after the deadline, less than 20 percent in both cases.

Table 39: Number of Filings Submitted, in which the Proposed Rate Increase was Greater than or Equal to 10%, by Month, Small Group

Month Small Group, less than 10% Small Group, 10% or more All Small Group Filings
2010 July . 1 1
2010 August . . .
2010 September 1 4 5
2010 October 7 5 12
2010 November 3 . 3
2010 December 4 1 5
2011 January 7 2 9
2011 February 7 . 7
2011 March 26 2 28
2011 April 41 8 49
2011 May 19 5 24
2011 June 7 8 15
2011 July 25 8 33
2011 August 47 **9 56
2011 September 16 2 18
2011 October 53 8 **61
2011 November 23 4 27
2011 December 25 2 27
2012 January 34 1 35
2012 February 26 2 28
2012 March 45 . 45
2012 April **54 4 58
2012 May 45 4 49
2012 June 27 2 29
2012 July 26 8 34
2012 August 15 1 16
2012 September 11 5 16
2012 October 3 3 6
2012 November 1 . 1
2012 December . . .

Note: Month and year designation is determined by the date the filing was filed by the carrier (and not the effective date of the filing).
Cells highlighted in blue** indicate the month when the greatest number of filings was submitted.

It is also possible to compare the mean proposed and implemented premium increases for filings submitted before and after September 1, 2011; the results are presented below in Table 40. As noted earlier, for analytic purposes the final implemented rate includes both the increases that are reviewed and approved by state regulators, and the cases of filings where an approved rate is not available (and there is no clear indication that the filing was disapproved by the state or withdrawn by the carrier) so the proposed rate is used. The implemented increase in the individual market was hardly affected by the change, with an average rate of increase of 7.0 percent before the review program began and 7.0 percent afterward. However, the proposed rate increase in the individual market dropped from 8.1 percent before the review program began to 7.5 percent afterward. This suggests that the rate review program may have exerted a downward pressure on proposed rate increases in this market. In the small group market, the mean proposed rate increase also dropped following implementation of the rate review program from 4.7 percent to 3.1 percent. A contrast also appears to be present in the mean implemented increase in the small group market, but issues of item non-response bias (filings where a filed date was not present) may be the cause. Filings with a submission date prior to September 1, 2011 show an average implemented rate increase of 4.3 percent, those with a submission date after September 1 show one of 3.1 percent, and the 199 small group filings missing information on a submission date show an average increase of 9.5 percent (data not shown in Table).

Table 40: Rates of Premium Increases, Proposed and Approved, in the Individual and Small Group Markets, by whether Filing was Submitted before or after September 1, 2011

Market Date Submitted Number of Filings Mean Proposed Increase Mean Final Implemented Increase
Individual/ Conversion Before Sept 1, 2011 347 8.1% 7.0%
After Sept 1, 2011 248 7.5% 7.0%
Small Group Before Sept 1, 2011 247 4.7% 4.3%
After Sept 1, 2011 450 3.6% 3.1%

Note: Month and year designation is determined by the date the filing was filed by the carrier (and not the effective date of the filing). The Mean Proposed Increase is calculated using the subset of filings that include a proposed rate. The Mean Final Implied Increase is the average rate of premium increase used elsewhere in the report – when the approved rate is available, it is calculated using the approved rate, otherwise the proposed rate is used.


37 As described in this report’s Introduction section, reviewed filings are classified as “reasonable” or “unreasonable,” although regulators’ ability to deny or reduce proposed rates was not affected by the initiative – in some states, carriers may still implement “unreasonable” rate increases.

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