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Rate Review Press Conference

December 21, 2010
Washington, DC

Remarks as prepared for delivery

Good morning. Thank you for joining us.

I want to acknowledge some of the folks who are here with us today.

  • Jay Angoff, the Director of our Office of Consumer Information and Insurance Oversight.
  • A great advocate for consumers, Rhode Island Insurance Commissioner Chris Koller.
  • And Jenny Bass, a woman from Connecticut who’s generously agreed to share her story about how the efforts we’re talking about today have helped her family.

Today, we’re announcing the latest steps we’re taking as part of the Affordable Care Act to hold insurance companies accountable for their actions and put more power into consumers’ hands so they can make the best choices for them and their families.

Under new proposed rules our department is releasing today, health insurance companies that try to make unreasonable rate increases will come under tremendous scrutiny. Working hand-in-hand with our partners in the States, we will make sure these increases are thoroughly reviewed to determine whether they are based on accurate information. When rates are determined to be unreasonable, insurers will be required to publicly report and justify these increases.

For too long, it’s been all too common this time of year to open your mailbox and find a letter from your insurance company saying your premiums are going up 20 or 30 or 40 percent – often with little or no explanation. Whether it’s insurance for yourself, your family, or your small business, this is the kind of news that not only spoils your holidays, but can also endanger your health care coverage.

Even as health insurer profits have reached record levels, I’ve heard from countless Americans who feel helpless in the face of rising premiums.

One woman from California who had seen her premium rise over 30 percent wrote to me: “As a self-employed, hard-working person, I have no good options for health coverage.”

A small business owner in Florida whose premium had just gone up more than 23 percent wrote: “I am near the breaking point. With guaranteed annual increases at 10 to 15 times inflation, eventually, we will go out of business or be forced to cancel insurance. Either way, it’s a lousy set of options.”

Many of them wondered how the increases could possibly be justified – and often, they were right.

For example, when California’s largest insurance company raised rates by up to 39 percent earlier this year, the State Insurance Commissioner investigated, found that the hikes were based on faulty data, and got them revised.

But too often, there hasn’t been enough accountability and transparency. While some states aggressively review rate increases, others haven’t had the resources or the authority to do so. And consumers didn’t have the information they needed to know whether they were getting a bad deal.

The result was that, as the cost of health insurance for the average working American more than doubled over the last decade, many felt like they were at the mercy of insurance companies, with no control over when the next exorbitant rate hike was coming.

Under the new health care law, that’s already starting to change. As a former State Insurance Commissioner, I know that states can be highly-effective consumer advocates when they have the right resources and the necessary authority.

We saw that earlier this year in California. And we saw that again in Connecticut recently when regulators rejected a 20 percent premium hike that wasn’t justified by the underlying cost trends and could have been devastating for people like Jenny.

That’s why, earlier this year, our department issued the first round of grants from the $250 million provided by the Affordable Care Act to help 45 states and the District of Columbia strengthen or expand their rate review process. For consumers, these funds mean states have powerful new tools with which to keep insurance companies honest.

Then last month, we announced new rules that will lower the share of your premium that insurers can spend on administrative costs like marketing and executive bonuses. Under these rules, most insurance plans will be required to spend at least 80 to 85 percent of your premium for medical care and quality improvement. If they don’t, they have to give you a rebate. And all insurers will have to publicly display how they’re spending your premium, so you know what you’re getting for your money.

Today, we’re announcing our next step to put consumers back in control of their health care. Under these proposed rules, in 2011, insurers in the individual and small group markets that want to raise rates by more than 10 percent will need to publicly disclose their rate increases and their justifications for them.

Those increases will then undergo a thorough actuarial review, either by the state or by HHS. If a state doesn’t have the resources or authority to conduct a review, our department will step in to make sure all Americans get protected.

While these rules will not allow the federal government to deny an insurer’s unreasonable rate increase, a growing number of states have this authority and use it. And when our department does identify an unreasonable rate increase, we will post these findings to our website and insurers will be required to do the same.

Ultimately, we believe the bright light of sunshine will convince more insurers to think twice and check their math before submitting large rate hikes, which means the benefits of these new rules will be felt by millions of Americans.

This is our latest step to put consumers back in charge of their health care. The reforms we’ve announced over the last nine months have shifted power from insurance companies to people and their doctors. Now, Americans can see how their premiums are being spent and why they’re going up. And using the Insurance Finder on our new consumer website, they can compare the prices and benefits of all their insurance options, public and private, in one place for the first time ever.

Because of the new law, it’s easier than ever before to pick the health insurance plan that’s best for your family.

And by making the insurance industry more transparent, we’re also creating a more competitive market. The more information consumers have about their coverage choices, the more motivated insurers are to improve those choices.

We are committed to cracking down on unreasonable premium increases and to bringing more transparency and accountability to our health insurance market. And in the months to come, we’ll continue to work closely with our partners in states to implement this law and do just that.