Trends in Premiums in the Small Group and Individual Insurance Markets, 2008-2011. Executive Summary


During the past 50 years, health insurance markets have been defined by two interrelated characteristics – rapidly increasing premiums and lack of transparency. From 2001 to 2011, the cost of a family policy rose 113 percent while overall consumer prices rose 27 percent.1 Yet, consumers face substantial difficulty in understanding this inflation-prone market. Typically, consumers cannot identify what products are available in the individual market, small group and large group markets; their cost; and the benefit design of each product.

The Patient Protection and Affordable Care Act (hereafter referred to as the Affordable Care Act), which became law in March 2010, includes provisions intended to safeguard consumers against both unreasonable increases in premiums and problems associated with the lack of transparency. To achieve these objectives, the Affordable Care Act (1) authorizes review of the reasonableness of rate increases; (2) requires that carriers meet minimum medical loss ratios (MLRs) described below; and (3) provides grants to states to improve protocols for reviewing proposed premium increases. Regulations issued by the United States Department of Health and Human Services (DHHS) related to rate review stipulate that insurers increasing premiums by 10 percent or more must justify such premium increases to either the state insurance department or DHHS. To improve transparency, the Affordable Care Act requires health insurance issuers offering individual, small group, or large group coverage to submit a report to DHHS each year with data on premium income, administrative expenses, and medical claims expenses.

To prevent insurers from retaining an unreasonable share of the premium dollar for administrative expenses and profits, the Affordable Care Act also requires insurers to meet target medical loss ratios (MLRs), which are the percentage of premium income spent on medical benefits and quality improvement according to the line of business. DHHS set the MLR target at 80 percent for individual and small group coverage. Carriers not meeting this target are required to provide customers with premium rebates.

In September 2010, the DHHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) contracted with NORC at the University of Chicago to conduct an analysis of trends in health insurance premiums for comprehensive major medical insurance products in the individual and small group markets from 2008-2011. To accomplish this analysis, NORC and its partners built a database of carrier rate filings from a sample of states. The project addressed the following research questions:

  1. How have rates of premium increases changed over time?
  2. How do premium increases vary by type of insurance product and by state?
  3. What percentage of premium requests have been denied or modified?
  4. How do MLRs vary by type of insurance product and by state?
  5. Have MLRs met state requirements?
  6. What are state trends in premium increases?
  7. How has the transparency of rate premium increases changed over time?

The remainder of this executive summary reviews the study’s methods, data limitations and key findings.

1 Cost increase for family policy: Kaiser Family Foundation and Health Research and Educational Trust, “Employer Health Benefits 2011 Annual Survey,” p. 1. Overall consumer price increase:, Accessed July 30, 2012.

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