White House White Board: Health Reform & Rate Review

Uploaded by whitehouse on 21.12.2010

Kathleen Sebelius: Hi, I am Kathleen Sebelius.
I am the Secretary of Health and Human Services.
And I used to be a Kansas insurance commissioner,
so I am going to talk this morning a little bit about rate
review, one of the new features of the Affordable Care Act.
And talk a little bit about why that is so helpful to consumers
across the country.
So I am here with the white board and we have a chart that
shows you what has happened over the last ten years.
CPI is the Consumer Price Index, the average price increase for
goods and services for the gym shoes you buy for your kids,
or the groceries you pay for at the grocery store.
And over the last ten years things have gotten more
expensive, almost a 30% increase on consumer goods.
But that is really a very different picture in the
health insurance market.
So while you pay 30% more for a variety of goods,
insurance costs have gone way up.
Have gone up 131%, which is very difficult for lots of families.
It prices people out of the market.
They have assumed more of those costs out of their own pocket,
and year in and year out they are paying more and getting less
in the insurance markets.
Now I want to show you what has happened in three specific
states and why this new rule is so important.
So let's flip the white board.
First of all, let's start with some basic facts.
Every State in the country has an insurance commissioner,
whose job it is to make sure companies are solvent so they
can pay claims, but also to protect consumers.
So, looking at the rates that insurance companies want to
charge and looking at justifications for those rates.
Now, a lot of states do a very good job with a thorough review,
hiring experts to look at the numbers from the insurance
companies, often having hearings,
making sure that what the company wants to
charge is justified.
Other states have laws that don't provide that
kind of close scrutiny.
So the Affordable Care Act does a couple of things.
First, we have new resources that have gone to states to
encourage state insurance commissioners to hire more
staff, to get more authority to use the authority they have to
actually protect their consumers.
But also it gives the Department of Health and Human Services
some new ability to provide an extra look at higher rates.
To shine a bright light on what is going on.
And to make sure that consumers are protected.
Companies will have to put on their websites and on
our website, what the justification is for rates.
For the first time, consumers will be able to see how their
company compares to other companies in their own state
or even around the country.
So let me give you a practical example of why rate review is so
important and how it matters to you and your family.
Let's start with the State of Massachusetts.
Insurance companies came in to Massachusetts and proposed
a 26% rate increase last year.
That is a whopping increase.
And what happened in that State is the insurance commissioner
took a hard look at it, they brought their resources to bare,
they questioned the company and what ended up in Massachusetts
was not a 26% increase, but a 13% increase.
So they cut in half the increases for
Massachusetts consumers.
In the State of Connecticut, the Connecticut insurance
commissioner actually allowed for a 20% increase.
It was announced across the State and there was such an
outcry that actually the insurance commissioner has
resigned and this rate increase has been withdrawn altogether.
My guess is that the companies are likely to come back with an
additional proposal, but I can pretty well guarantee you that
that proposal will be much more careful in the future about what
kinds of rates are justified.
And finally, the State of California.
Last year, one of the issues that actually was part of the
final debate around the passage of the Affordable Care Act was
this astronomical, almost 40% rate increase which was proposed
in the State of California and consumers across that State had
gotten notices that their individual insurance policies
were about to go up 40%.
Again there was an enormous outcry.
The insurance commissioner in California heard that outcry,
set up his own rate review process, brought in experts,
looked at the rates.
And in California that almost 40% increase was
cut in half to 20%.
So in each of these cases, rate review made a huge
difference for consumers.
So rate review done at the state level is very effective.
And we now have the tools to actually declare rates
to be unreasonable.
Anything over 10% which would have been in all three of these
states, the Department of Health and Human Services will be able
to review to get the justification for it,
to publish on our website, to have the companies publish on
their website.
And to make sure that if consumers in America see a rate
increase, that it is based on medical costs increasing.