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September 2006 |
Table of Contents
Introduction
Who Regulates What?
In the Absence of Regulation, What Factors Do Insurers Use to Set Premiums?
What Have States Done to Regulate Variation in Premiums?
Rate Bands
Pure Community Rating
Adjusted Community Rating
The National Association of Insurance Commissioners (NAIC) Model Law for Adjusted
Community Rating
How Do States Choose between Using Rate Bands and Community Rating?
How Have States Controlled the Overall Price of Health Insurance Premiums?
Establishing a Medical Loss Ratio
Requiring Actuarial Soundness
Overseeing and Preventing Adverse Selection
Other Mechanisms
What Processes Do States Use to Review Variation in, and Overall Prices of, Premiums?
Conclusion
Understanding Rate Regulation in Your State: Questions to Ask Your Insurance Department
Annotated Bibliography
When setting commercial health insurance premiums, legislators and health insurance regulators must grapple with two key sets of issues: What is a fair way to distribute premiums—should all enrollees be charged the same price, or should people who are likely to use more health care pay higher premiums? And how can regulators and lawmakers ensure that the overall price of health insurance is reasonable, that the majority of premium dollars are actually used for health care claims (instead of for administration or for profits), and that insurers have enough money to pay their claims?
In this piece, we first discuss how much authority the states and the federal government have when it comes to regulating health insurance premiums. We go on to discuss the many factors insurers use when setting premiums, some of the ways states have regulated premiums charged to people in the small group and individual markets, how states have controlled the overall price of health insurance premiums, and the processes states use to review variation in and overall prices of premiums.
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Families USA thanks Neil Vance, Craig van Aalst, and Mary Beth Senkewicz
for their contributions to, and review, of these materials. |
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