Looking Under the Hood: “Enhanced” Rate Review to Improve Affordability

By Sabrina Corlette and Vrudhi Raimugia

Health insurance rate review has long been an annual ritual for state insurance departments. In most states, proposed rate increases are assessed based on whether they are “adequate,” “excessive,” or “discriminatory.” State insurance regulators often do not take into account whether the rate is affordable for the consumer and whether the insurance company is working to get its policyholders the best deal possible from providers of health care goods and services.

Yet the prices charged by providers and suppliers are widely recognized as the primary drivers of premium increases in the U.S. Providers in many health care markets are able to charge commercial insurers prices well in excess of actual costs, largely because consolidation in the provider market has given health systems considerable market power. Absent meaningful competition in these markets, some states are turning to regulatory options to keep prices in check. One of these regulatory options is an enhanced form of premium rate review, in which regulators are empowered to review whether the provider prices that compose such a large proportion of consumers’ premiums are reasonable or within prescribed cost growth targets.

In a recently released report, CHIR experts share findings from a 50-state assessment of insurance department authority to conduct rate review, with a focus on their power and capacity to use that process to rein in provider price inflation and improve health insurance affordability for consumers.

Download the report here.

Support for this work was provided by the Laura and John Arnold Foundation.