Consumer Groups: Force Insurers To Provide More Details Justifying Price Increases

Consumer advocates are pushing for tough rules on how much information insurers must provide to justify premium increases, a step required by the new health overhaul law.

Later this year, many insurers will have to publicly report how much they plan to raise premiums and why. Consumer advocates say draft rules on the information insurers must provide fall short and should require details on increases in CEO salaries, broker commissions and prices charged by doctors, hospitals and drug companies. Some insurers have warned that requiring too much information could add to their administrative costs.

The National Association of Insurance Commissioners is developing recommendations for federal regulators and has solicited opinions from insurers, medical providers and consumer groups. A subcommittee of NAIC has crafted a draft premium increase reporting form that includes nearly 50 questions.

Some consumer groups — and the American Medical Association – say the form needs beefing up. Insurers, meanwhile, say the form seeks too much information in places.

“We need more information if consumers and (regulators) are going to be able to make any decisions on the justification for premium increases,” Washington and Lee University law professor Timothy Jost told a subcommittee of NAIC during a conference call Thursday.

Under the new health overhaul law, insurers seeking “unreasonable” premium increases must publicly provide justification for their rates to consumers, state regulators and the federal Department of Health and Human Services (HHS).

The federal government will not have the power to reject premium increases, although some states have that ability. Federal officials still haven’t defined what will qualify as an unreasonable increase. The NAIC draft form includes queries about the maximum increase faced by policyholders, any increase or decrease in underlying medical costs and three years of average annual premium changes.

Consumer groups want additional information in that form about what medical providers are charging insurers. That’s necessary, they say, because insurers are blaming those costs for rapidly rising premiums. “These claims cannot be reasonably evaluated unless detailed information regarding them is available to the public,” says a June letter sent to the NAIC by Jost and 11 other consumer representatives. The representatives were selected by the NAIC and include academics like Jost and members of advocacy groups such as Health Access, California Health Advocates and Consumers Union.

In a separate letter, the American Medical Association also called on regulators to require more information about insurer administrative costs, including CEO salaries and lobbying expenses.

Insurers also weighed in. Aetna, for example, urged regulators to drop a requirement that the form include disclosure of minimum and maximum rate increases for individual policy holders, which it said would “add multiple levels of cost and complexity” to the reporting process. Averages would be sufficient, the insurer said.

After discussing points made by the consumer groups and insurers, the NAIC members agreed Thursday to make revisions to the form and reconsider it later this month.

“This is important work and we want to make sure everyone is given ample opportunity to submit ideas,” says Kansas Insurance Commissioner Sandy Praeger, who heads the subcommittee working on the form.

While the draft form probably provided enough information for a casual consumer wondering how much rates were going up, it lacked detail needed for groups, Congress, the media or others wanting to do a more sophisticated analysis, says Jost.

This year, such an analysis performed by auditors hired by California regulators uncovered errors in calculations used by insurers WellPoint and Aetna to justify premium hikes. Both companies withdrew the proposed increases following the audit.

Once completed, the draft form will be sent to HHS and could be accepted or rejected, Washington insurance Commissioner Mike Kreidler told the committee Thursday.

The information contained in the form will be drawn by insurers from rate filings they submit to the states when they seek a premium increase.

Most states do not make full rate filing information available to the public, although Oregon this year began posting the filings on a public website, over the objection of insurers.

Kreidler says he personally would like to see the full information posted, but that the draft reporting form would provide “a comprehensive overview of the rate filings.”