Louisiana is one of seven?states where the federal Centers for Medicare and Medicaid Services will begin reviewing health insurance rate increases higher than 10 percent in an evaluation required under the Affordable Care Act.
Unlike in most states, Louisiana law does not allow the state Department of Insurance to regulate health insurance rates.
However, that could change next year, Insurance Commissioner Jim Donelon said Friday. He plans to ask the Legislature for the authority to do the minimum review required by CMS or the ability to review all health insurance rate filings, the same as now takes place for auto, homeowners, workers compensation, and property and casualty coverage.
“I’m looking at that and will make that decision between now and the end of the year,” Donelon said.
Last year, the Insurance Department received a $1 million federal grant to add the staff needed to review health insurance rate filings, Donelon said. The department has applied for another federal grant. Donelon said he expects that application will be successful, although?he does not know how much additional money will be available.
With the grant money and fees the state charges the insurance industry to regulate it - roughly $40 million a year - the Insurance Department will be able to take on the additional work of reviewing health insurance rates without additional sources of revenue, Donelon said. The department sent back around $13 million of the total to the state’s general fund during the last fiscal year.
According to a CMS report, the other states that lack the authority to regulate health insurance rates for individuals and small groups include Alabama, Arizona, Idaho, Missouri, Montana and Wyoming. In Iowa, Pennsylvania and Virginia, CMS will review only the rates affecting small groups.
Insurers will have to submit a “justification” for an increase of 10 percent or more to CMS and state regulators before implementing the rate hike. CMS will post such justifications on its website. Insurers will be required to post a justification on their websites for rate hikes that are determined to be unreasonable.
Nationally, health insurance rates for families and small businesses have more than doubled during the past decade, according to CMS. In 2010, the average annual premium for an individual was $5,049, while the premium for family coverage was $13,770.
“We do hope that Louisiana gets that authority to disapprove rates that are excessive because we’ve seen how insurers can inflate cost projections and end up charging rates that may not absolutely be necessary and are not necessarily in the best interests of consumers,” said Sondra Roberto, a spokeswoman for Consumers Union. “We would really hope that Louisiana would be able to take over that from CMS eventually and crack down on those unfair rate hikes.”
Louisiana’s system for regulating property and casualty insurance companies, which requires Insurance Department approval before new rates go into effect, would be a good model for regulating health insurers, Roberto said.
“If we’ve got that going on for property and casualty, why not for health?” Roberto said.
Roberto said until Louisiana adds health insurance rate regulation statutes, CMS is capable of handling the reviews.
Only a few states have no oversight at all, so the burden won’t be that heavy on CMS, and the agency should have the budget to handle those duties, Roberto said.