Understanding Rate Regulation in Your State: Questions to Ask Your Insurance Department

What are your state’s rules about how premiums can vary among small businesses or other small groups?

• Does your state prohibit insurers from charging higher premiums based on the health status of the group’s members or based on their prior medical claims? (That is, does your state use “community rating” or “adjusted community rating”?)
  
• What factors can insurers consider when setting a small group’s premiums? For example, do insurers consider age, sex, type of business, or geographical location? Why has your state chosen to allow insurers to use these factors? What is the maximum amount that premiums can vary based on each factor?
  
• Is there an overall limit on the amount that premiums can vary? For example, in some states, premiums charged to one group cannot be more than twice as high as the premiums charged to another group. In contrast, without rules, some groups are charged premiums that are 10 or 13 times as high as others.
  
• Does your state limit the amount that insurers can raise a group’s premiums each year? What are the rules about price increases at renewal?
  
• Similarly, what are the rules about how much premiums can vary for individuals in your state? Do the same rate rules apply to both small groups and to people who purchase policies as individuals?

Does your state require insurers to use at least a certain percentage of their premium dollars (e.g., 75 percent) for medical claims as opposed to administrative and marketing costs? (This percentage is known as a “medical loss ratio.”)

How does the state review insurers’ premiums?

• Must insurers file proposed premiums, and the justification for their proposed increases, with the state?
  
• Does the state review and approve these filings before the charges go into effect? If not, at what intervals does the state review an insurer’s rates?
  
• Does the insurance department investigate premiums in response to consumer complaints?
  
• Can consumer organizations participate in hearings about premiums?

How well does the insurance department think that the state’s rules are controlling insurance costs?

• Do insurers ever issue refunds when they find that their premiums are higher than they need to be to cover claims and expenses? 
  
• How often does the state require insurers to lower premiums from what the insurer proposed?
  
• How does your state compare to others with regard to the number of uninsured, whether employers offer and employees accept insurance, typical premiums, and whether an adequate number of insurance carriers are serving the individual and small group markets?

Nonprofit insurers are generally required by law to operate for the benefit of subscribers or the public, and not for profit. Nonetheless, they take in revenues that exceed their expenses. All insurers need to keep some money in reserve in case they suddenly face large claims, but how much money is it appropriate for a nonprofit insurer to keep?

• Does your state have rules about the maximum amount that nonprofit insurers can accumulate as surplus? If not, what are nonprofit insurers required to do in exchange for their tax exemptions?
   

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