Insurance Premium Rate – Premium Regulation

Department of Insurance Rate Regulation
authority to lower rates

The CA Department of Insurance (DOI) has authority to “push” rates increase down, as premium increases must be certified to be actuarially sound, but the DOI does not have authority to establish rates.  ^{Modern Health Care 4.22.2015 DOI RIPS    Anthem Rate Hikes on Grandfathered Plans}

Please note though, under Health Care reform the 80% Medical Loss Ratio (MLR) rule, where rebates must be given if are not enough claims paid out.

National Association of Insurance Commissioners  5 page summary & introduction on Rate Regulation 

The #rate review process of Medical Loss Ratio 

The rate review process of Medical Loss Ratio  does not presume that an increase above 80% is unreasonable,

***Please note, this may be prior to ACA/Health Care Reform.  Check our citations below

nor does it prevent issuers from increasing rates.  The process only requires such increases be reviewed and that certain information be made public.   When HHS reviews a rate increase, HHS will determine that the rate increase is unreasonable if the increase is:

• Excessive – meaning the increase causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided.
• Unjustified – meaning the data or documentation the issuer provides to HHS in connection with the increase is incomplete, inadequate or otherwise does not provide a basis upon which the reasonableness of an increase may be determined.
• Unfairly discriminatory – meaning the increase results in premium differences between insured’s within similar risk categories that (1) are not permissible under applicable state law or (2) in the absence of an applicable state law, do not reasonably correspond to differences in expected costs.

The examination must include an analysis of all of the following:

• The impact of medical trend changes by major service categories
• The impact of utilization changes by major service categories
• The impact of cost-sharing changes by major service categories
• The impact of benefit changes
• The impact of changes in enrollee risk profile
• The impact of any overestimate or underestimate of medical trend for prior year periods related to the rate increase
• The impact of changes in reserve needs
• The impact of changes in administrative costs related to programs that improve health care quality
• The impact of changes in other administrative costs
• The impact of changes in applicable taxes, licensing or regulatory fees;
• Medical loss ratio
• The issuer’s risk-based capital status relative to national standards ^{(Blue Cross Memo on Rate Review) 6/2011 Update 154.205 Federal Regulation}

Review of Rate Increases

§10181-10181.13

10181. For purposes of this article, the following definitions shall apply:

(a) “Large group health insurance policy” means a group health insurance policy other than a policy issued to a small employer, as defined in Section 10700.

(b) “Small group health insurance policy” means a group health insurance policy issued to a small employer, as defined in Section 10700.

(c) “PPACA” means Section 2794 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-94), as amended by the federal Patient Protection and Affordable Care Act (P.L. 111-148), and any subsequent rules, regulations, or guidance issued pursuant to that law.

(d) “Unreasonable rate increase” has the same meaning as that term is defined in PPACA.

10181.2. This article shall apply to health insurance policies offered in the individual or group market in California. However, this article shall not apply to a specialized health insurance policy; a Medicare supplement policy subject to Article 6 (commencing with Section 10192.05); a health insurance policy offered in the Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code); a health insurance policy offered in the Healthy Families Program (Part 6.2 (commencing with Section 12693)), the Access for Infants and Mothers Program (Part 6.3 (commencing with Section 12695)), the California Major Risk Medical Insurance Program (Part 6.5 (commencing with Section 12700)), or the Federal Temporary High Risk Pool (Part 6.6 (commencing with Section 12739.5)); a health insurance conversion policy offered pursuant to Section 12682.1; or a health insurance policy offered to a federally eligible defined individual under Chapter 9.5 (commencing with Section 10900)

.

10181.3. (a) (1) All health insurers shall file with the department all required rate information for individual and small group health insurance policies at least 60 days prior to implementing any rate change.

(2) For individual health insurance policies, the filing shall be concurrent with the notice required under Section 10113.9.

(3) For small group health insurance policies, the filing shall be concurrent with the notice required under Section 10199.1.

(b) An insurer shall disclose to the department all of the following for each individual and small group rate filing:

(1) Company name and contact information.

(2) Number of policy forms covered by the filing.

(3) Policy form numbers covered by the filing.

(4) Product type, such as indemnity or preferred provider organization.

(5) Segment type.

(6) Type of insurer involved, such as for profit or not for profit.

(7) Whether the products are opened or closed.

(8) Enrollment in each policy and rating form.

(9) Insured months in each policy form.

(10) Annual rate.

(11) Total earned premiums in each policy form.

(12) Total incurred claims in each policy form.

(13) Average rate increase initially requested.

(14) Review category: initial filing for new product, filing for existing product, or resubmission.

(15) Average rate of increase.

(16) Effective date of rate increase.

(17) Number of policyholders or insured’s affected by each policy form.

(18) The insurer’s overall annual medical trend factor assumptions in each rate filing for all benefits and by aggregate benefit category, including hospital inpatient, hospital outpatient, physician services, prescription drugs and other ancillary services, laboratory, and radiology. An insurer may provide aggregated additional data that demonstrates or reasonably estimates year-to-year cost increases in specific benefit categories in major geographic regions of the state. For purposes of this paragraph, “major geographic region” shall be defined by the department and shall include no more than nine regions.

(19) The amount of the projected trend attributable to the use of services, price inflation, or fees and risk for annual policy trends by aggregate benefit category, such as hospital inpatient, hospital outpatient, physician services, prescription drugs and other ancillary services, laboratory, and radiology.

(20) A comparison of claims cost and rate of changes over time.

(21) Any changes in insured cost-sharing over the prior year associated with the submitted rate filing.

(22) Any changes in insured benefits over the prior year associated with the submitted rate filing.

(23) The certification described in subdivision (b) of Section 10181.6.

(24) Any changes in administrative costs.

(25) Any other information required for rate review under PPACA.

(c) An insurer subject to subdivision (a) shall also disclose the following aggregate data for all rate filings submitted under this section in the individual and small group health insurance markets:

(1) Number and percentage of rate filings reviewed by the following:

(A) Plan year.

(B) Segment type.

(C) Product type.

(D) Number of policyholders.

(E) Number of covered lives affected.

(2) The insurer’s average rate increase by the following categories:

(A) Plan year.

(B) Segment type.

(C) Product type.

(3) Any cost containment and quality improvement efforts since the insurer’s last rate filing for the same category of health benefit plan. To the extent possible, the insurer shall describe any significant new health care cost containment and quality improvement efforts and provide an estimate of potential savings together with an estimated cost or savings for the projection period.

(d) The department may require all health insurers to submit all rate filings to the National Association of Insurance Commissioners’ System for Electronic Rate and Form Filing (SERFF). Submission of the required rate filings to SERFF shall be deemed to be filing with the department for purposes of compliance with this section.

(e) A health insurer shall submit any other information required under PPACA. A health insurer shall also submit any other information required pursuant to any regulation adopted by the department to comply with this article.

10181.4. (a) For large group health insurance policies, all health insurers shall file with the department at least 60 days prior to implementing any rate change all required rate information for unreasonable rate increases. This filing shall be concurrent with the written notice described in Section 10199.1.

(b) For large group rate filings, health insurers shall submit all information that is required by PPACA. A health insurer shall also submit any other information required pursuant to any regulation adopted by the department to comply with this article.

(c) A health insurer subject to subdivision (a) shall also disclose the following aggregate data for all rate filings submitted under this section in the large group health insurance market:

(1) Number and percentage of rate filings reviewed by the following:

(A) Plan year.

(B) Segment type.

(C) Product type.

(D) Number of insured’s.

(E) Number of covered lives affected.

(2) The insurer’s average rate increase by the following categories:

(A) Plan year.

(B) Segment type.

(C) Product type.

(3) Any cost containment and quality improvement efforts since the health insurer’s last rate filing for the same category of health insurance policy. To the extent possible, the health insurer shall describe any significant new health care cost containment and quality improvement efforts and provide an estimate of potential savings together with an estimated cost or savings for the projection period.

(d) The department may require all health insurers to submit all rate filings to the National Association of Insurance Commissioners’ System for Electronic Rate and Form Filing (SERFF). Submission of the required rate filings to SERFF shall be deemed to be filing with the department for purposes of compliance with this section.

10181.5. Notwithstanding any provision in a contract between a health insurer and a provider, the department may request from a health insurer any information required under this article or PPACA.

10181.6. (a) A filing submitted under this article shall be actuarially sound.

(b) (1) The health insurer shall contract with an independent actuary or actuaries consistent with this section.

(2) A filing submitted under this article shall include a certification by an independent actuary or actuarial firm that the rate increase is reasonable or unreasonable and, if unreasonable, that the justification for the increase is based on accurate and sound actuarial assumptions and methodologies. Unless PPACA requires a certification of actuarial soundness for each large group health insurance policy, a filing submitted under Section 10181.4 shall include a certification by an independent actuary, as described in this section, that the aggregate or average rate increase is based on accurate and sound actuarial assumptions and methodologies.

(3) The actuary or actuarial firm acting under paragraph (2) shall not be an affiliate or a subsidiary of, nor in any way owned or controlled by, a health insurer or a trade association of health insurers. A board member, director, officer, or employee of the actuary or actuarial firm shall not serve as a board member, director, or employee of a health insurer. A board member, director, or officer of a health insurer or a trade association of health insurers shall not serve as a board member, director, officer, or employee of the actuary or actuarial firm.

(c) Nothing in this article shall be construed to permit the commissioner to establish the rates charged insured’s and policyholders for covered health care services.

10181.7. (a) Notwithstanding Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code, all information submitted under this article shall be made publicly available by the department except as provided in subdivision (b).

(b) Any contracted rates between a health insurer and a provider shall be deemed confidential information that shall not be made public by the department and are exempt from disclosure under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). The contracted rates between a health insurer and a large group shall be deemed confidential information that shall not be made public by the department and are exempt from disclosure under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).

(c) All information submitted to the department under this article shall be submitted electronically in order to facilitate review by the department and the public.

(d) In addition, the department and the health insurer shall, at a minimum, make the following information readily available to the public on their Internet Web sites, in plain language and in a manner and format specified by the department, except as provided in subdivision (b). The information shall be made public for 60 days prior to the implementation of the rate increase. The information shall include:

(1) Justifications for any unreasonable rate increases, including

all information and supporting documentation as to why the rate increase is justified.

(2) An insurer’s overall annual medical trend factor assumptions in each rate filing for all benefits.

(3) An insurer’s actual costs, by aggregate benefit category to include, hospital inpatient, hospital outpatient, physician services, prescription drugs and other ancillary services, laboratory, and radiology.

(4) The amount of the projected trend attributable to the use of services, price inflation, or fees and risk for annual policy trends by aggregate benefit category, such as hospital inpatient, hospital outpatient, physician services, prescription drugs and other

ancillary services, laboratory, and radiology.

10181.9. (a) On or before July 1, 2012, the commissioner may issue guidance to health insurers regarding compliance with this article. This guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

(b) The department shall consult with the Department of Managed Health Care in issuing guidance under subdivision (a), in adopting necessary regulations, in posting information on its Internet Web site under this article, and in taking any other action for the purpose of implementing this article.

10181.11. (a) Whenever it appears to the department that any person has engaged, or is about to engage, in any act or practice constituting a violation of this article, including the filing of inaccurate or unjustified rates or inaccurate or unjustified rate information, the department may review rate filing to ensure compliance with the law.

(b) The department may review other filings.

(c) The department shall accept and post to its Internet Web site any public comment on a rate increase submitted to the department during the 60-day period described in subdivision (d) of Section 10181.7.

(d) The department shall report to the Legislature at least quarterly on all unreasonable rate filings.

(e) The department shall post on its Internet Web site any changes submitted by the insurer to the proposed rate increase, including any documentation submitted by the insurer supporting those changes.

(f) If the department finds that an unreasonable rate increase is not justified or that a rate filing contains inaccurate information, the department shall post its finding on its Internet Web site.

(g) Nothing in this article shall be construed to impair or impede the department’s authority to administer or enforce any other provision of this code.

10181.13. The department shall do all of the following in a manner consistent with applicable federal laws, rules, and regulations:

(a) Provide data to the United States Secretary of Health and Human Services on health insurer rate trends in premium rating areas.

(b) Commencing with the creation of the Exchange, provide to the Exchange such information as may be necessary to allow compliance with federal law, rules, regulations, and guidance.

Insurance.CA.GOV Health Guidance

Rate Increases must be certified by an Actuary
CA SB 1163

The rates and rating factors for most types of insurance must be filed with the insurance regulatory agency for each state where the insurance is to be sold. In some states and for some types of insurance, the rates must get regulatory approval before they can be used. law.freeadvice.com/

RATES AND RATING AND OTHER ORGANIZATIONS

 

Article 1.  Purpose and Scope of Chapter ……………… 1850.4-1851.1
Article 2.  Making and Use of Rates ………………….. 1853.5-1853.9
Article 2.5.  Making and Use of Rates–Insurance of
Properties Being Purchased From
Department of Veterans Affairs ………… 1853.95-1853.97
Article 4.  Advisory Organizations …………………….. 1855-1855.5
Article 5.  Joint Underwriting and Joint Reinsurance ………….   1856
Article 6.  Records and Examinations …………………… 1857-1857.4
Article 6.5.  Recording and Reporting of Loss and Expense
Experience ……………………………. 1857.7-1857.9
Article 7.  Hearings, Procedure and Judicial Review ……… 1858-1858.7
Article 8.  Penalties ………………………………… 1859-1859.1
Article 9.  Miscellaneous …………………………….. 1860-1860.3
Article 10.  (Reduction and Control of Insurance Rates)   1861.01-1861.16