Georgia consumers who are weary of increases in the cost of health insurance should take note: Insurers will soon have to provide more detailed, consumer-friendly justifications if they plan to hike your premiums by 10 percent or more.
Georgia Insurance Commissioner Ralph Hudgens has officially warned Georgia companies of the change, which will take effect next month as part of the national health care overhaul. The new requirement -- which applies to individual and small group plans -- doesn't guarantee that the rapid escalation in health insurance prices will slow. But it will force the state's insurers, who do not have to get permission to raise rates, to fully explain why they are charging more.
"What this regulation does is allow consumers to have more information about what is going on with their own premiums," said William Custer, a Georgia State University professor who is a health care expert.
Georgia insurers have frequently bumped up premiums by more than 10 percent in recent years for consumers who buy their own insurance in the individual market. Blue Cross Blue Shield of Georgia, the state's largest insurer, has hit thousands of its customers with hikes of 20 percent or more in recent years, according to state records.
Insurers say the big increases are necessary because of the explosion in the cost of medical care. "Most people only see the premiums that they pay, and they don't understand that those premiums are reflecting dramatic increases in the prices being charged for medical services," said Robert Zirkelbach, press secretary for America's Health Insurance Plans, a Washington-based trade organization.
Zirkelbach said federal statistics show that the cost of insurance coverage and the benefits paid out by insurers each increased by about 75 percent between 2000 and 2009.
A new rate review process will examine whether those medical costs are driving the increases in premiums.
Insurers and some critics said the federal law will fail to stop rate increases because it doesn't do enough to rein in the rising cost of medical care and because new coverage requirements will simply force insurers to charge more to include the expanded benefits. "Enhanced benefits are always going to mean higher premiums," said Graham Thompson, a lobbyist for most of Georgia's large insurers.
The rate review process will require the Georgia Department of Insurance to collect and examine more detailed financial data than in the past and determine whether a rate increase is reasonable. Most of the scrutiny will involve examining expenditures -- especially spending on claims -- as well as the insurer's projections of future costs for those covered in the group.
"We're going to be digging more into those losses than we were in the past," said Steve Manders, director of insurance product review at the Insurance Department.
The change represents a significant shift in Georgia. When John W. Oxendine was insurance commissioner, he maintained for years that state law gave his office almost no authority to influence what insurers charged for health insurance, even if he believed that rate increases were excessive.
Manders said that the Insurance Department is reviewing the current law -- and considering proposing changes -- to allow for the more robust review that the federal health law prescribes. The Insurance Department is still hammering out the detailed rules it will use to comply with the federal law. Georgia law requires advance approval of rates for individual plans sold by health maintenance organizations. But for most individual and small group plans, insurers simply notify the commissioner of new rates and file financial data in support of the change.
Insurers in Georgia were among the most likely in the nation to get the rate increases they wanted, according to a new report by the Government Accountability Office. In North Dakota and New York, more than 70 percent of initial rate increase filings were withdrawn or adjusted down, compared with just 5 percent in Georgia, according to the report.
Federal officials said simply revealing the information -- which will be posted online for consumers to see -- and adding scrutiny will make a difference in states such as Georgia where the commissioner doesn't set the rates. "If the [Insurance] Department raises a question or identifies errors, typically a company will resubmit their filing or correct their filing, and this can often result in lower rates for consumers," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at the U.S. Department of Health and Human Services. With the changes made by Hudgens, the feds have determined that Georgia has an "effective" rate review process.
Georgia was one of five states that declined to apply for a federal grant last year to beef up its rate review process -- a decision made by Oxendine. Manders said the Insurance Department is considering applying for the federal rate review grant during the second round of funding.
Cindy Zeldin, executive director of the nonprofit Georgians for a Healthy Future, said the new requirements could help the consumers in the individual market who do not have the clout to negotiate with their insurers, and who need better information about what's happening with their plans. "The more tools the Insurance Department has to work on behalf of consumers, the better," she said.
Dr. Ed Gerson said more scrutiny of Georgia's insurers can't come soon enough. The Atlanta radiologist said the premium on his individual health care policy from Blue Cross Blue Shield increased by 33 percent in less than two years. He was hit with two double-digit increases even though he hasn't cost the insurer anything -- his minimal medical costs did not exceed his deductible. He filed a complaint with the Insurance Department last year but was told that the state had little authority over what the insurer charged and could do nothing.
Gerson, who believes insurers were trying to increase rates before the new regulations of the federal health law hit, has since contacted legislators and regulators to try to push for better oversight.
"When the CEO’s bonus and shareholder profits are more important than the services the insurance companies provide, there is something wrong with the system," he said.
Gerson said he's concerned that new reviews will not be effective because Georgia law doesn't give the insurance commissioner the authority to turn down a request, as other states do. But he hopes it will have at least some impact on prices.
"If they can keep the increases to 10 percent or less," he said, "we're better off than the 33 percent we have had in the last year and a half."
