December 2, 2010
PROCESS FOR HEALTH INSURANCE RATE INCREASES
By: Janet L. Kaminski Leduc, Senior Legislative Attorney
You asked (1) how an insurance company gets an approved rate increase in Connecticut for individual and group health insurance, (2) if there is a public hearing on such a proposed rate increase, and (3) if either the healthcare advocate or attorney general plays a role in the process.
State law requires insurance companies and health maintenance organizations (HMOs) to file individual health insurance rates with the Connecticut Insurance Department for approval by the insurance commissioner. It also requires HMOs to file group rates for approval by the commissioner.
The department reviews rate increase requests based on actuarial science and applicable statutes, which provide that rates may not be excessive, inadequate, or unfairly discriminatory. By law, the department must (1) take action on insurance company rates within 30 days or they are deemed approved and (2) approve or disapprove HMO rates within a reasonable time.
State law does not require a public hearing on a health insurance rate filing, although the commissioner may hold one. State law does not prescribe a role for the healthcare advocate or attorney general in the insurance rate approval process.
SB 194 was introduced in the 2010 session to revise the health insurance rate approval process. The bill would have required the commissioner to hold a public hearing on certain rate filings and the healthcare advocate, the attorney general, or both, could participate in the hearing. The bill died in the Judiciary Committee. The text of the bill was added as an amendment to HB 5090, which passed the House, but died on the Senate calendar.
RATE REVIEW PROCESS
State law requires insurance companies and HMOs to file proposed health insurance rates for individual contracts (i.e., those sold directly to individuals) with the Insurance Department for the commissioner's approval (CGS §§ 38a-481 and 38a-183). It also requires HMOs to file proposed rates for group contracts (e.g., sold to employers for their employees) for the commissioner's approval. (But the department does not have statutory authority to review insurance company rates for group medical policies.)
The law prohibits excessive, inadequate, or unfairly discriminatory rates. For insurance companies, proposed rates are deemed approved if not otherwise disapproved within 30 days of being filed with the department. For HMOs, the commissioner has to approve or disapprove rates within a reasonable time.
The department performs an actuarial analysis to determine whether a rate increase is warranted. As part of the analysis, it reviews the following information:
1. historical claim experience by month for the previous three years by broad service category (e.g., inpatient, outpatient, physician, pharmaceutical);
2. “claim lag triangles,” which analyze incurred claims by month with paid claims that extend three months past the last incurral date;
3. loss ratios from inception-to-date on a calendar year basis (i.e., the ratio of earned premium to incurred claims); and
4. the company's expenses using the most recent financial statement.
If Connecticut experience is not statistically significant (i.e., credible), the department requests the above information on a nationwide basis if applicable.
The department tests the validity of the assumptions used in the filing by analyzing the information, along with any additional information included in the company's actuarial memorandum. It reviews any other adjustments to the pricing that the company proposes and determines whether the rate increase requested is inadequate, excessive, or unfairly discriminatory. If the rate meets the statutory standards, the department approves the rate increase request. If it does not, the department disapproves the rate.
SB 194 (2010)
The Insurance and Real Estate Committee introduced SB 194 in the 2010 session to revise the health insurance rate approval process. The bill:
1. required insurers and HMOs to file rates with the department within 120 days before their proposed effective date,
2. required the department to post rate filings on its website and provide a 30–day public comment period,
3. required a public hearing on a proposed rate filing if it would increase rates by more than 10% and the healthcare advocate or attorney general requested the hearing within five business days of the filing being posted online,
4. allowed the healthcare advocate and attorney general to be parties to such a public hearing, and
5. established disclosure and record retention requirements for rate filings.
If the criteria for a public hearing were met, the bill required commissioner, within five days from the healthcare advocate's or attorney general's request, to set a hearing date and conspicuously post on the department's website the date, place, and time of the hearing. The bill required the hearing to be held (1) within 90 days before the proposed effective date of the rate filing at a place and time convenient for the public and (2) in accordance with law.
The bill required the (1) commissioner, within 30 days after the hearing, to issue a written decision approving, modifying, or disapproving the rate filing; (2) decision to specify all factors used to reach it; and (3) department to post the decision on its website within two business days from being issued.
HealthCare Advocate and Attorney General
The bill authorized the healthcare advocate, the attorney general, or both, to be parties to any rate filing hearing held.
It granted these officials access to the department's rate filing records. It required department attorneys, actuaries, accountants, and other experts who review or assist in the determination of a rate filing to cooperate with the officials.
It allowed the officials to (1) summon and examine under oath witnesses either deemed necessary to the rate filing review and (2) require the filer, or any holding or parent company or subsidiary, to produce books, vouchers, memoranda, papers, letters, contracts, and other documents reasonably related to the filing.
● OLR Bill Analysis for sSB 194: http://cgalites/2010/BA/2010SB-00194-R000242-BA.htm.
● OLR Research Report 2009-R-0442, Medical Insurance Rate Increases Requested and Approved in Connecticut.