Consumer groups on Monday said state and federal regulators should move quickly to set rules to protect Americans from health insurance premium “rate shocks” and to prevent insurers from charging far higher rates in low income areas, when major provisions of the federal health law take effect in 2014.
Dozens of recommendations for implementing a wide variety of health law requirements are included in a report by 20 consumer groups, including the American Cancer Society Cancer Action Network, and others appointed to represent consumers before the National Association of Insurance Commissioners, the professional association for state insurance regulators.
Many of the recommendations affect insurers, who need to know soon how to design the policies they will sell starting in 2014, according to the report.
Provisions of the federal law that take effect in 2014 include a ban on insurers rejecting applicants who have medical problems, the opening of new marketplaces, called exchanges, where individuals and small businesses can shop for coverage and the provision of sliding-scale subsidies to help many low- and moderate-income Americans purchase coverage. That year, the law also requires most Americans to carry coverage and creates penalties for businesses with more than 50 workers who don’t offer insurance to their workers.
The law allows insurers to vary premiums based on where a person lives and to charge older policyholders no more than three times what they charge younger ones. Currently, the majority of states have no such age restriction on policies sold to individuals. As a result of the changes, younger people may see higher premiums than they do now, although those increases are expected to be offset in many cases by federal subsidies that will also be available.
To avoid rate shock – big jumps in premiums – the groups recommend national standards for how insurers implement the new three-to-one variation in age-based premiums.
“How are insurers allowed to adjust rates as you age?” says Sabrina Corlette, one of the report’s authors and a research professor and project director at the Center on Health Insurance Reforms at Georgetown University. “Do they go up every year (of a person’s age) or every five years? If insurers are allowed to keep rates the same early in life, but have big jumps as policyholders age from one year to the next, it can be really a shock.”
The group said state regulators should also carefully craft the geographic limits that insurers will use in determining premiums. Those geographic bands should be wide enough to ensure there is no “redlining” of people living in lower-income areas.
The report said standardized open enrollment periods should be set up, so that consumers purchasing coverage outside the new marketplaces will have the same time frame as consumers buying through the exchanges. That could reduce the chance that insurers find ways to attract healthier people to policies offered outside the exchanges, which could drive up the cost for those purchasing insurance inside.