CALPIRG

Consumers and small businesses have seen lower health insurance rate hikes thanks to increased scrutiny and public transparency under California’s rate review process.

Rate review has saved Californians millions of dollars, with regulators pressing insurers to voluntarily reduce rate increases to reasonable levels. But in order to fully protect consumers and small businesses from unreasonable rate hikes, rate review must be strengthened.    
Under California’s rate review law established in 2011, health insurance carriers must publicly justify any proposed rate increase on individual or small group plans. Health insurance carriers must submit rate filings to state officials for review. The public is able to access the filings online and comment on them.
 
Depending on the type of health insurance, filings are reviewed either by the California Department of Insurance (CDI) or the Department of Managed Health Care (DMHC). These agencies use their own actuarial staff to oversee the review of each rate filing in the individual and small group market to determine if the proposed rate is reasonable.Regulators also post rate filing documents and give the public the opportunity to review and comment. The regulators then meet with the carriers to clarify or challenge the assumptions driving projected cost increases or request any missing information. They can request that the carriers modify or reduce rate increases if they find that they are unjustified but the insurance company can decide whether to comply with the request. If they do not, the regulator can make an official determination that the rate filing is “unreasonable. 

In this brief, CALPIRG examines the implementation of rate review in California, and the results it has achieved for consumers and small employers across the state. Our analysis includes posted rate filings that were scheduled to go into effect between January 1, 2011 and January 1, 2016.

Key findings

• Health insurance carriers have filed 565 proposed rate changes in the individual and small group markets.
• Carriers have voluntarily reduced or withdrawn 69 rate hikes after beginning the rate review process.
• Between January 1, 2011 and January 1, 2016, DMHC and CDI estimate that consumers have saved $417 million from rate hikes that were filed with the regulator and subsequently reduced.
• At least 26 times, health insurance carriers have moved forward with rate increases that regulators found unreasonable. Four rate hikes that were declared unreasonable were subsequently withdrawn.
• Over the last five years, an estimated 1,178,191 Californians have been subject to rate hikes that were declared unreasonable but still went into effect. Many of the same health insurance products have had multiple rate hikes declared unreasonable.
• In 2015 alone, consumers could have saved as much as $46 million on their premiums if insurers had agreed to lower their rates to the level that regulators deemed “reasonable.”