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Fighting Unreasonable Health Insurance Premium Increases

May 19th, 2011
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.

Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight, and Maryland State Insurance Commissioner Beth Sammis, a terrific consumer advocate.

Over the last 10 years, the cost of an average health insurance policy has doubled—growing much faster than wages and inflation and putting coverage out of reach for millions of families and business owners.

Meanwhile, health insurance companies have recently reported some of their highest profits in years and are holding record reserves.

And even though insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, many insurance companies continue to raise their rates.

Often, these increases come without any explanation or justification.

But the Affordable Care Act is changing this.

As part of that law, our Department is working closely with states to strengthen their ability to review, revise or reject unreasonable rate hikes.

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.

Today, 43 states the District of Columbia and a number of territories are using over $45 million in grants from the health care law to improve their oversight of proposed health insurance rate increases.

And we know that increased scrutiny works.

When California’s largest insurance company tried to raise rates three times in the last year, totaling as much as 87 percent in increases for some people, the State Insurance Commissioner investigated and found that much of the hikes were based on faulty data. He got the rates reduced, saving people and companies in that state millions of dollars.

In North Dakota, nearly 30,000 residents saw a proposed increase of 23.7 percent cut to 14 percent after public outcry drew attention to it.

And in Rhode Island when one insurer requested an increase of 7.9 percent, the Insurance Commissioner analyzed the data and rejected it as excessive, lowering it to 1.9 percent.

Each time a state acts to reduce unreasonable or unjustified premium increases, consumers benefit.

Yet we know there is still great variation when it comes to the level of scrutiny that states can and do apply to rate increases.

While some states review proposed increases to determine if they are reasonable, others lack the legal authority or resources to effectively do so.

And the information available to consumers about their premiums remains inconsistent and often unreliable.

So after working closely with state leaders – and state insurance commissioners in particular – our Department is announcing its final rate review regulations under the Affordable Care Act – new rules that will ensure that any significant rate increase in any state is scrutinized to make sure it is reasonable and justified.

Starting this September, 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, if they are found unreasonable, their justification.

Again, states will take the lead -- but if a state doesn’t have the authority or the resources to conduct a review, our department will step in to make sure all Americans get the information they deserve.

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.

The Affordable Care Act also applies the power of sunshine to lower costs:

Each time a rate increase is reviewed, the results will be posted on the HHS website and consumers will be able to see a summary of the factors driving the rate increase. And insurers will be required to post this information on their websites too.

By providing consumers with these basic but vital details, they will have powerful information at their fingertips as they choose the best plan for them and their families.

By shining a light on an often impenetrable world, we’re making it easier for consumers to find quality, affordable coverage, without feeling around in the dark.

We’re confident that insurers everywhere are already thinking twice and checking their math before submitting large rate hikes. That means millions of Americans will see savings to their own bottom line – the family budget.

Now, unfortunately, I have another commitment. I’m sorry that I cannot stay on the call, but I leave you in good hands with Steve Larsen who will say a little more about the new regulation. Steve…