June 7, 2010

Washington, DC – Nevada Senator Harry Reid today made the following statement urging the State of Nevada to apply for grant funds to assist with their review of health insurance premium increases.  These funds, which are made available through the Patient Protection and Affordable Care Act, will help protect consumers and small business owners in Nevada from unfair rate hikes while helping states improve oversight of the process that is used to set health insurance premiums.

“One of the main reasons we passed health insurance reform was to lower the cost of health insurance.  As we all know, insurance companies consistently raise insurance rates with limited oversight,” Reid said.  “This has resulted in unexplained and unjustified rate increases that made it more expensive for Nevada families and businesses to afford decent coverage.  In addition to requiring insurers to justify unreasonable premium increases to state regulators and the Secretary of Health and Human Services, the new law makes these funds available to help states like Nevada with the resources they need to approve rate increases before they take effect.  I urge the Governor to apply for these funds to help protect Nevada consumers and small businesses.  With today’s budget difficulties, this funding could make a big difference in allowing Nevada’s insurance commissioner to exercise appropriate authority granted by the legislature.”

Relief for Consumers & Employers

Forcing insurance companies to publicly justify their rate increases will finally shed light on industry practices that have long squeezed the budgets of American families. This unprecedented new transparency in the health insurance market will encourage insurers to do more to control health care costs and discourage insurers from charging exorbitant premiums. Reviewing rate increases will go a long way toward ensuring that consumers finally get the value they deserve for their premium dollars.

• American families cannot afford to endure unreasonable insurance rate hikes year after year.  These costs reduce take-home pay and erode hard-won wage increases.
• Employers – especially owners of small businesses – are increasingly unable or unwilling to absorb these premium increases. The percentage of small firms (1 to 199 employees) offering health insurance benefits to their workers has dropped from 65% in 1999 to 59% in 2009. In contrast, 98% of firms with 200+ workers offered coverage in 2009 (Kaiser-HRET, 2010).

Support for States

Some states have a long history of effective oversight of health insurance premiums but many have limited resources or authority to conduct these reviews. The new grant program aims to strengthen those abilities and partner with states to reverse these troubling trends.

• The Affordable Care Act creates a program to provide funding for states to create reporting and review processes.  Congress appropriated $250 million for the grant program over the next five years, directing HHS to begin awarding grants in FY2010.
• Grants are available to States that are willing to innovate, improve and enhance their efforts to review insurance company rate increases
• This grant program will give States more support to review rate increases and take action against insurers seeking unreasonable rate hikes.
• All states and the District of Columbia are eligible for this first round of rate review grants.  To receive a grant, a state must submit a plan for how it will use grant funds to either develop or enhance its process of reviewing and approving, disapproving or modifying health insurance premium requests from now through September 30, 2011. 
• States that successfully apply will receive $1 million grant during the first round.
• HHS will take applications for a second round of state grants beginning in fiscal year 2011, after new regulations regarding rate review take effect.  Second round grants will allow states to further strengthen their rate review, and begin to provide the Secretary of HHS with the rate data required under the law.

Reforms for the Insurance Industry

The Affordable Care Act includes a series of reforms to improve insurer accountability and consumer transparency.  These reforms include:

Review of Unreasonable Premium Increases:  

• The new law requires insurers to report justifications for unreasonable rate increases to the states and the Secretary of HHS for further scrutiny, and to publicly justify such changes.   Once regulations are issued setting guidelines for what constitutes unreasonable, the grants will provide states with the resources to determine if rate requests are justifiable.
• For the first time, insurers will be required to post on their websites a justification for rate changes that are determined to be unreasonable.  The Secretary of HHS will also post the data thereby forcing insurers to explain to consumers why their rates are increasing.
• Under the new law, if insurance companies have excessive or unjustified premium increases, the new health insurance exchanges could exclude them from participating. By not participating in the exchanges, insurance companies would lose access to millions of new customers. 

Medical Loss Ratio

• The new law requires insurers in the individual and small group markets to spend at least 80 % of the premium dollar on health care, and insurers in the large group market to spend at least 85% of the premium dollar on health care;
• Insurers will be required to refund money to their policyholders to the extent the insurer does not meet the 80% or 85% statutory threshold.
• Insurers must submit reports on their medical loss ratios to HHS, and the reports will be posted on HHS’s consumer website.