This article first appeared in the St. Louis Beacon, Nov. 30, 2011 - The news release posted on the Missouri Department of Insurance's website sounded routine: Coventry Health and Life Insurance Co., intends to raise rates an average of 10.9 percent for its 11,171 Missouri policyholders.
What was unusual about the announcement was the fact that the information was available at all. Missouri does not give insurance regulators legal authority to collect and review rate filings, which some insurers regard as trade secrets. But the veil was lifted for the first time this year because the Affordable Care Act bypasses state restrictions on insurance rate filings.
The federal law requires the Department of Health and Human Services to connect, review and distribute information on insurers seeking rate increases exceeding 10 percent. Consumers wanting to know which insurers are raising rates above 10 percent can find the information from a "rate review tool" on HHS's website.
The federal review of Coventry's increase has not been completed. One key benchmark that HHS uses in making that determination is an insurer's medical loss ratio. This refers to the amount of the premium that's spent on direct medical care. The care act requires that between 80 percent and 85 percent of money insurers collect be used on health care services. Beginning next year, insurers spending too little on medical services will be required to issue rebates to customers.
Not only was Coventry required to justify its 10.9 percent rate increase to HHS, it had to post a lot of data on its website explaining why it believed the increase was needed. Previously, such information might have been concealed from consumers or presented in arcane language. The law allows Coventry policyholders to tap into a company website to better understand why they will be paying more for insurance, starting Jan. 1. Coventry's explanations are online.
From the website, consumers can find the company's explanation for the rate increase, the kinds of medical services that are causing the increase, how the company intends to use the extra premium amounts, the size of the last three premiums increases, and the outcome of the federal review.
Consumers will learn, for example, that from a monthly premium of $330.70, the company would spend $248.68 on medical services for the policyholder, and devote $67.79 to administrative expenses, slightly more than 20 percent. The company would keep $13.23 after covering claims and administrative costs.
Even if HHS determines that Coventry's proposed increase is unjustified, the federal agency lacks the power to force the insurer to roll back the rate. HHS's only tool is an appeal to the insurer to either rescind the rate hike or issue refunds. In any case, the insurer is expected to post a justification for the hike on its website within 10 days following the federal review.
HHS Secretary Kathleen Sebelius says the agency is trying to empower consumers by "shining a light on unjustified premium increases." Earlier this year an HHS spokesperson says the new policy gives consumers "a written justification in plain language" whenever an insurer raises rates beyond what HHS thinks is reasonable.
"The important point is that for the first time, consumers in every state can see what their increase is and understand why," the spokesperson says, adding that the underlying goal is to encourage rollbacks of certain rate hikes.
"Even if we can't reject rates, we think that this transparency will moderate rate increases. This really provides a lot of value to consumers."
Funding for the Beacon's health reporting is provided in part by the Missouri Foundation for Health, a philanthropic organization that aims to improve the health of the people in the communities it serves.