Trends in Premiums in the Small Group and Individual Insurance Markets, 2008-2011. Approval Rates of State Regulators

11/06/2012

Many filings in prior approval states record both the carrier’s initial proposed rate increase and the increase ultimately enacted. In most cases proposed rate increases were approved without modification by the state’s regulatory agency. For the purposes of these analyses, rate increases that were approved with or without modification are considered ‘approved,’ while those that were denied or withdrawn by the carrier are not. All filings in file and use states that were not denied on retrospective review or withdrawn are considered ‘approved’ for the purposes of our analysis of approval rates (but not for rate modifications, as described below).

In 2011, the percentage of rate requests that were approved declined, particularly in the small group market, suggesting that regulators became more aggressive in their reviews from 2010-2011. In 2008, regulators approved 76.9 percent of proposed rate increases in the individual market (Figure 12). Corresponding figures for subsequent years were 79.3 percent in 2009, 83.1 percent in 2010, and 74.8 percent in 2011. In the small group market, 84.4 percent of requested rate increases were approved in 2008, versus 64.0 percent in 2009, 68.6 percent in 2010, and 69.7 percent in 2011. While multivariate analyses were not conducted for this study, the lower rates of approval for the latter years in the small group market is consistent with year-to-year changes in the composition of the sample, or with increased regulatory scrutiny of proposed rates. Further work is needed in this area to draw a substantive conclusion about these trends and their underlying causes.

Figure 12: Percentage of Premium Increases Approved, by Year and Market

Figure 12: Percentage of Premium Increases Approved, by Year and Market

† Data for 2011 are incomplete.
* Estimate is significantly different from 2011 at p < .05.
Note: Percentage is calculated as a share of filings for which the regulatory disposition was known. Filings from file and use jurisdictions are considered approved.


We also analyzed the proportion of filings approved without modification as compared with those changed as a result of interactions with state regulatory agencies (Table 18). This analysis is based on a subset of 1,741 filings that list both a proposed and an approved rate, which differs slightly from the criteria used above. There are several possible explanations for this discrepancy. Filings that were disapproved by regulators or withdrawn list a proposed rate, but not an implemented rate.28 In many cases, filings obtained from state summary documents did not contain a proposed rate, but in being publicly released by the state are implied to have been approved. Conversely, some filings from file and use states did not include enough information to give us confidence that the rate was not changed through retrospective review. As a result, discussion of modified rates is limited to the subset of filings for which review is known.

For most of these filings, the regulator approved the initial proposed rate. In the individual market, the percentage of filings modified increased from 13.7 percent in 2008 to 20.6 percent in 2011. In the small group market, corresponding modification rose from 2.0 percent in 2008 to 10.4 percent in 2011. Seventeen states modified at least one proposed rate increase. States with more known rate modifications include Iowa with 55, all in the individual market; Oregon with 45 in the individual market and 13 in small group; and Pennsylvania with 44 in the individual market and 2 in small group.

Table 18: Number and Percentage of Filings with Known Premium Increase Modifications, by Year and Market

  2008 2009 2010 2011† Total
Number of Filings with Premium Increase Modifications
Individual 32 61 85 63 241
Small Group 1 0 13 14 28
All 33 61 98 77 269
Percentage of Filings with Premium Increase Modifications, as a % of all reviews
Individual 13.7% 14.2% 20.9% 20.6% 17.5%
Small Group 2.0% 0.0% 10.0% 10.4% 7.1%

† Data for 2011 are incomplete.


The quality of the data poses a significant barrier to straightforward analysis of the impact of these modifications on state- and national-level estimates of premium increases. For example, in the individual market in 2011, the 445 total collected filings include 415 listing a proposed rate and 329 listing an approved rate; of those, only 299 include both.29 Direct comparison of the mean proposed rate among the 415 and the mean approved rate among the 329 would, if anything, obscure the effects of the rate review process by diluting the pool of filings with a known review with 146 filings with incomplete information. It is likely that these incomplete filings are missing information for systematic (non-random) reasons, and thus we would urge caution in applying these findings, particularly the estimated rates.

The results of comparing proposed rates with approved rates among filings including both are illustrated below in Figures 13 and 14. In the individual market, rate modification had a significant effect through the years 2009 – 2011, including a reduction of 1.9 percent in both 2010 and 2011. Potential reductions also appeared to occur in the small group market, but small sample sizes and low numbers of known modified rates resulted in wide confidence intervals for the estimates.

Figure 13: Rates of Premium Increases Among Filings with Complete Rate Information, Proposed and Approved, by Year - Individual/Conversion

Figure 13: Rates of Premium Increases Among Filings with Complete Rate Information, Proposed and Approved, by Year - Individual/Conversion

† Data for 2011 are incomplete.
* Estimate is significantly different from Proposed Rate Increase at p < .05.


Figure 14: Rates of Premium Increases Among Filings with Complete Rate Information, Proposed and Approved, by Year - Small Group

Figure 14: Rates of Premium Increases Among Filings with Complete Rate Information, Proposed and Approved, by Year - Small Group

† Data for 2011 are incomplete.
* Estimate is significantly different from Proposed Rate Increase at p < .05.


One caution that applies to both markets is that state procedures for archiving disapproved or withdrawn filings are inconsistent. In some states, files on proposed rate increases that are rejected by the regulator are kept open until a compromise rate increase can be arrived at; in others, the carrier appears to re-file at a later date under a separate tracking number. Furthermore, just as document retention problems may have affected data from earlier study years, it is unclear whether disapproved or withdrawn filings were made available (either to Perr & Knight employees or on public websites) to the same extent as approved rate increases. The effects of premium increase modification on state-level estimates (for filings with complete rate information) for the individual and small group markets are shown below (Tables 19 and 20).

Table 19: Rates of Premium Increases Among Filings with Complete Rate Information, Proposed and Approved, by State and Nationally for the Individual Market, 2008-2011

State Individual/ Conversion 2008 Prop Individual/ Conversion 2008 App Individual/ Conversion 2009 Prop ndividual/ Conversion 2009 App Individual/ Conversion 2010 Prop Individual/ Conversion 2010 App Individual/ Conversion 2011† Prop Individual/ Conversion 2011† App
AL . . . . 9.2% 9.2% . .
AR N/R N/R N/R N/R N/R N/R 10.0% 7.2%
CA . . . . . . . .
CO N/R N/R N/R N/R 16.4% 16.4% 10.9% 10.9%
CT . . 20.1% 20.1% N/R N/R 11.5% 8.2%
FL 11.4% 11.4% 8.9% 8.8% ‡12.5% ‡12.4% 10.1% 9.9%
HI . . . . . . . .
IA 2.9% 2.8% 7.6% 7.3% 19.6% 18.4% 11.6% 10.2%
ID . . . . . . . .
IL 14.4% 14.4% 10.4% 10.4% 9.6% 9.6% . .
IN 13.5% 13.5% 15.1% 15.1% 10.7% 8.2% N/R N/R
KS . . . . . . . .
KY 8.9% 8.1% 7.1% 7.1% 5.5% 5.5% 2.8% 2.8%
MA . . . . . . . .
MD . . . . . . . .
ME N/R N/R 18.5% 11.0% 15.6% 11.1% 7.5% 5.2%
MI N/R N/R N/R N/R N/R N/R N/R N/R
MN N/R N/R 10.7% 10.7% 7.2% 7.2% 7.3% 7.3%
NC N/R N/R N/R N/R 13.9% 11.6% 6.2% 4.9%
NE . . . . 21.8% 21.8% 15.9% 15.0%
NJ . . 4.1% 4.1% 10.8% 10.8% 12.7% 12.7%
OH . . N/R N/R N/R N/R N/R N/R
OK . . . . . . . .
OR 12.8% 12.2% 16.3% 15.2% 19.8% 14.9% 13.4% 9.0%
PA N/R N/R N/R N/R 16.4% 8.6% 8.1% 6.9%
RI N/R N/R N/R N/R N/R N/R N/R N/R
SD N/R N/R 14.1% 14.1% 17.5% 16.2% . .
VA . . 13.8% 13.8% 8.7% 8.7% . .
WA N/R N/R N/R N/R 14.1% 13.9% 11.9% 10.6%
WI 7.3% 7.3% . . . . . .
MEAN US 11.6% 11.3% 11.3% 10.3% 13.1% 11.2% 10.7% 8.8%

† Data for 2011 are incomplete.
‡ Two observations from 2010 in Florida’s Individual/Conversion market are considered outliers – they are conversion plans which represent the only business in this market for their respective carriers. This gave them a disproportionate impact on the state-level estimate. They were removed from the state-level calculations, but retained for the national estimate.
Note: Approved rates differ from those in Table 14 because this Table is restricted to filings with complete rate information (see supra). Some estimates are not reportable (N/R) because the proportion of state member months represented in the sub-sample is less than 50%.


Table 20: Rates of Premium Increases Among Filings with Complete Rate Information, Proposed and Approved, by State and Nationally for the Small Group Market, 2008-2011

State Small group 2008 Prop Small group 2008 App Small group 2009 Prop Small group 2009 App Small group 2010 Prop Small group 2010 App Small group 2011† Prop Small group 2011† App
AL 8.4% 8.4% . . . . . .
AR . . . . . . . .
CA . . . . . . . .
CO . . 5.4% 5.4% 8.8% 8.8% 3.8% 3.8%
CT . . . . 15.3% 15.2% N/R N/R
FL 19.2% 19.2% 16.4% 16.4% 13.1% 10.9% 7.2% 7.2%
HI . . . . . . . .
IA . . . . . . . .
ID . . . . . . . .
IL . . . . . . . .
IN N/R N/R 21.0% 21.0% -1.1% -1.2% 1.7% 1.7%
KS . . . . . . . .
KY -0.4% -0.4% 3.7% 3.7% 5.4% 5.4% 6.1% 6.1%
MA . . . . . . . .
MD . . . . . . . .
ME . . . . N/R N/R 6.7% 6.7%
MI . . . . . . . .
MN N/R N/R N/R N/R 0.1% 0.1% -1.2% -1.2%
NC 40.0% 40.0% . . . . 9.0% 9.0%
NE . . . . . . N/R N/R
NJ . . . . . . . .
OH . . N/R N/R 4.3% 4.3% -0.4% -0.4%
OK . . . . . . . .
OR 4.7% 4.7% 5.9% 5.9% 13.1% 12.7% 7.4% 6.0%
PA N/R N/R N/R N/R N/R N/R N/R N/R
RI . . . . 2.0% 1.3% 14.3% 11.6%
SD . . . . . . . .
VA . . . . . . . .
WA . . . . 4.2% 4.2% N/R N/R
WI . . . . . . . .
MEAN US 12.8% 12.5% 12.5% 12.5% 7.3% 6.7% 5.0% 4.5%

† Data for 2011 are incomplete.
Note: Approved rates differ from those in Table 14 because this Table is restricted to filings with complete rate information (see supra). Some estimates are not reportable (N/R) because the proportion of state member months represented in the sub-sample is less than 50%.


28 However, carriers may in some cases file a new application (under a separate tracking number) during the next or even the same quarter, or may aggregate plans differently in subsequent filings. We cannot therefore conclude that policyholders covered by disapproved filings were not subject to a rate increase.

29 Since analysis of mean rate increases in the previous section includes filings with only one listed rate (e.g., the approved rate from a state summary or the proposed rate in a file and use state), these totals may not match those in other parts of the report.

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