Medical costs main contributor to insurance rate increases
About 13 percent of the annual rate increases in the individual and small-group insurance markets exceeded 10 percent, according to a new study from the Commonwealth Fund.
The Affordable Care Act mandates that insurers must disclose the reason for an increase in premium of 10 percent or more for nongrandfathered plans. While the federal government cannot refuse an insurer's rate increase, it can determine if the increase is justified, noted the study.
The Commonwealth Fund looked at rate increases of 10 percent of more that took effect from July 2013 to June 2014, and for insurers that had plans covering at least 150 individuals. The report noted that medical costs were the main players in driving up costs, which include an increase in medical service use and higher unit prices.
Beginning in July 2013, the average annual increase by insurers in the individual market was $395, the Commonwealth Fund found. The average for insurers on the small-group market was $616.
The study sample included 113 filings. In 69 percent of those filings, insurers noted that a portion of their rate increase was due to an increase in taxes or fees, while 63 filings pointed to ACA taxes and fees as the main contributor to the rate increases.
Additionally, about half of the filings noted that the ACA's medical-loss ratio (MLR) contributed to the rate increases. The Commonwealth noted that the MLR rule has had "some restraining effect on larger rate increases, as some insurers appear to be setting their rates as high as they can within the limits of the rule, suggesting that without it they might seek even higher increases."
However, FierceHealthPayer previously reported, the medical-loss ratio has positively affected the healthcare insurance industry, "working the way we hoped it would," according to Sen. John D. Rockefeller IV (D-W.Va.). That's because the MLR forces insurers to provide more accurate cost information, which makes it easier for consumers to shop for and purchase plans, Rockefeller said.
- here's the report (.pdf)