Insurance Premium Rate Review Process
Many people wonder each year how their premiums can continue to increase by such exorbitant amounts when they feel that they already can't manage the costs. While the system is highly complex, the rising cost of healthcare is the primary driver of premium increases. The more it costs an insurer to pay for the medical services and prescriptions its members receive, the more they have to take in, from you or your employer (if you have one), to cover those expenses.
Insurance works by anticipating the risk, or cost, of providing coverage to those it insures. Experts called actuaries within each insurance company review the historical data about their members' use of healthcare, and estimate what it will cost to provide those benefits in the next year. They factor in the administrative expenses, like salaries, overhead, capital expenses, etc., and arrive at an average amount they need to collect to insure each member for the year. Based on this information, each insurer then calculates the premium for each specific plan they offer, as well as the various cost sharing (deductibles, co-pays, co-insurance) that members will be responsible to pay in addition to the premiums. Finally, they submit this information, or rate filing, to the Connecticut Insurance Department (CID) for review and regulatory approval.
No insurer in Connecticut can sell any plan unless it has been approved by the CID through the rate review process. Once the CID receives an insurer's proposed rates for the next year, it is required to post the documents on its website, and provide notice. Actuaries at the CID will then review the rate filing for accuracy and compliance with state and federal law, and typically will request additional information concerning the insurer's assumptions and estimates. In 2017, proposed rates were submitted in the Spring, CID held two hearings in July, and CID issued its decision in September.
Once a proposed plan has been reviewed and deemed compliant with applicable law, the analysis of the requested premium must consider three factors - whether the rate is inadequate, excessive or unfairly discriminatory. If an insurer's requested premium is inadequate, or would not bring in enough money to cover the expected health care costs of its members, the CID may reject it and require that they increase the premium so that the insurer would be able to pay the health care costs for the year. If the CID finds that the requested premium is excessive, or would bring in more money than the insurer would need to cover expected costs, it could reduce the premium. Finally, if it finds that the premiums or plans discriminate against a class of citizens in some manner, the CID can direct the insurer to correct the problem and resubmit their filing.
For significant rate increase requests, the CID may also hold public hearings at which department staff asks questions of the insurer about the rationale for their request, as well as providing members of the public a limited opportunity to make statements about the proposed filing.
The Office of the Healthcare Advocate has the authority to request public hearings in certain rate filings where significant increases are requested, and also to request to intervene in hearings that CID does schedule, and OHA has done so in the past. Depending on the circumstances in 2018, once proposed rates for 2019 are filed in the Spring, OHA is likely to seek public input on whether or not to request hearings or intervene in scheduled hearings, as well as on what issues and concerns OHA should raise if it does intervene.