Health Insurance Premium Increases in the Individual Market Since the Passage of the Affordable Care Act. Introduction


The Affordable Care Act brings an unprecedented level of scrutiny and transparency to health insurance rate increases. Thanks to the law, for the first time ever, insurance companies in all states cannot raise rates without accountability or transparency.[1] By requiring insurance companies to document, submit for review, and publicly justify rate increases of 10 percent or more, requests for rate increases above that level receive greater scrutiny than they had prior to the Affordable Care Act. While a number of the broader insurance reforms included in the Affordable Care Act are set to start in 2014, the Rate Review Program created under the law is already in effect and benefiting consumers by increasing standards for review of premium increases and overall insurance company transparency.

The Affordable Care Act requires all non-grandfathered policies renewing on or after September 23, 2010 to cover preventive services with zero cost-sharing, to guarantee availability to children without regard to pre-existing conditions, to phase out annual dollar limits on essential health benefits, and to provide a set of basic patient protections. In addition, the Affordable Care Act directs insurers offering products in the individual market to spend at least 80 percent of premiums on medical care, and starting September 1, 2011, requires that requests for rate increases of 10 percent or more for non-grandfathered policies be reviewed for reasonableness.

A Kaiser Family Foundation study of the effects of health insurance rate review concluded, “Our analysis of publicly available information about state rate review programs suggests that these programs have a material influence on premiums that ultimately get charged to individuals and small businesses.”[2] Similarly, an HHS study analyzed requested rate increases of 10 percent or more, and found that the rates implemented were 2.8 percentage points lower than requested, and that among all rate increases in 2011 (including those above and below 10 percent), the average rate increase implemented was 1.4 percentage points below the rate requested.[3] The study also found that, among the rate requests 10 percent or more that had been finalized as of the date of the study, more than 50 percent resulted in consumers receiving either a lower rate increase than requested or no increase at all.

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