Report: Protecting Consumers

A Glimpse into Arizona’s Health Insurance Rate Review Program

Released by: Arizona PIRG Education Fund

Executive Summary

The purpose of A Glimpse into Arizona’s Health Insurance Rate Review Program is to provide an initial analysis on how effectively Arizona is reviewing health insurance rate filings for the individual market since being awarded status as a State with an Effective Rate Review Program.

Working with an actuary in Arizona, the Arizona PIRG Education Fund assessed four different rate filings that were chosen in part to provide a sampling of well-known and lesser known insurers; rate increases about to occur in either the individual or small group market; and to highlight any positive or negative trends that may impact the cost of health care for Arizonans.

Through our assessment, the Arizona PIRG Education Fund sought to determine whether each insurer had adequately justified their proposed rate increase; and, whether the Arizona Department of Insurance’s (ADOI) process was transparent, information was easily accessible, and the rate proposal was well-scrutinized to determine if it was reasonable.

In addition to considering the range of factors identified as part of an effective rate review program, we also evaluated additional information we deemed as critical to protecting consumers from excessive rate hikes.

Key findings include:

1.       ADOI deserves credit for encouraging stakeholders to offer suggestions to improve transparency of the filings and the rate review process, alerting interested parties when an applicable rate increase is filed and has been determined, and being responsive to inquiries on the rate process and on specific filings.

2.      Information about proposed health insurance rate increases is difficult to find on the ADOI website; in particular, it is challenging to access the actual rate filing.

3.      The complete rate filing does not appear to be transparent. For example, supplemental information, such as documents from the insurer in response to a question from ADOI, does not appear to be publicly available.

4.      Insurers appear to have not provided the public with sufficient information to justify their proposed rate increase and the underlying assumptions, particularly in the case of the insurers’ projected medical costs.

5.      Affordable Care Act’s (ACA) Medical Loss Ratios are sometimes only narrowly surpassing the 80% standard and may require insurers’ to issue rebates if their medical costs come in under projections.

6.      Insurers are currently not required to show that proposed rate increases are based on reasonable administrative costs and are not required to explain what they are doing to reduce rising medical costs in ways that improve quality.

7.      ADOI can determine a rate increase to be unjustified; however, they do not have the authority to protect consumers from an unreasonable rate increase.

Based on our assessment of the rate filings, the Arizona PIRG Education Fund recommends that ADOI conducts the following to strengthen the effectiveness of our state’s health insurance rate review process:

1.      Further expand transparency. Make the filings easier to locate on the ADOI website and make supplemental filing documents publicly available;

2.      Require insurers to thoroughly justify rate increase proposals. The justification should include the data and calculations necessary to evaluate their proposal as well as reasonable administrative costs and a strategy to lower health care costs. ADOI should then carefully scrutinize each of the insurers’ justifications; and,

3.      Request and advocate for authority to deny rate increases that are unjustified or unreasonable to better protect individual consumers and small businesses from excessive rate increases.

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