Republican States Bolstered Their Health Insurance Rate Review Programs Using Incentives From the Affordable Care Act.

The Affordable Care Act (ACA) included financial and regulatory incentives and goals for states to bolster their health insurance rate review programs, increase their anticipated loss ratio requirements, expand Medicaid, and establish state-based exchanges. We grouped states by political party control and compared their reactions across these policy goals. To identify changes in states' rate review programs and anticipated loss ratio requirements in the individual and small group markets since the ACA's enactment, we conducted legal research and contacted each state's insurance regulator. We linked rate review program changes to the Centers for Medicare and Medicaid Services' (CMS) criteria for an effective rate review program. We found, of states that did not meet CMS's criteria when the ACA was enacted, most made changes to meet those criteria, including Republican-controlled states, which generally oppose the ACA. This finding is likely the result of the relatively low administrative burden associated with reviewing health insurance rates and the fact that doing so prevents federal intervention in rate review. However, Republican-controlled states were less likely than non-Republican-controlled states to increase their anticipated loss ratio requirements to align with the federal retrospective medical loss ratio requirement, expand Medicaid, and establish state-based exchanges, because of their general opposition to the ACA. We conclude that federal incentives for states to strengthen their health insurance rate review programs were more effective than the incentives for states to adopt other insurance-related policy goals of the ACA.

States with stronger health insurance rate review authority experienced lower premiums in the individual market in 2010-13.

States have varying degrees of review authority over health insurance carriers' rates, including prior approval authority over proposed rates and requirements for loss ratios, the proportion of premium revenues spent on medical claims. The Affordable Care Act (ACA) requires carriers in certain categories of health insurance to provide public justification for rate increases of 10 percent or more. We collected data on how states changed their rate review authority and requirements during 2010-13, the years immediately after enactment of the ACA, and we combined these data with carrier filings. We found that adjusted premiums in the individual market in states that had prior-approval authority combined with loss ratio requirements were lower in 2010-13 ($3,489) than premiums in states with no rate review authority or that had only file-and-use regulations, which gave the states no authority to block rate increases ($3,617). Adjusted premiums declined modestly in prior-approval states with loss ratio requirements, from $3,526 in 2010 to $3,452 in 2013, while premiums increased from $3,422 to $3,683 in states with no rate review authority or file-and-use regulations only. Our findings suggest that states with prior approval authority and loss ratio requirements constrained health insurance premium increases.