California Health Insurance Rate Review

CALPIRG

Consumers and small businesses have seen lower health insurance rate hikes thanks to increased scrutiny and public transparency under California’s new rate review process.

Rate review has saved Californians millions of dollars, with regulators pressing insurers to voluntarily reduce rate increases to reasonable levels. But in order to fully protect consumers and small businesses from unreasonable rate hikes, rate review must be strengthened.    

Under California’s rate review law established in 2011, health insurance carriers must publicly justify any proposed rate increase on individual or small group plans. Health insurance carriers must submit rate filings to state officials for review, and the public is able to access the filings online and comment on them.

Depending on the type of health insurance, filings are reviewed either by the California Department of Insurance (CDI) or the Department of Managed Health Care (DMHC). These agencies use their own actuarial staff to review each rate filing in the individual and small group market to determine if the proposed rate is reasonable.

Regulators also post rate filing documents and give the public the opportunity to review and comment. The regulators then meet with the carriers to clarify or challenge the assumptions driving projected cost increases, or request any missing information. They can request that the carriers modify or reduce rate increases if they find that they are unjustified but the insurance company can decide whether to comply with the request. If they do not, the regulator can make an official determination that the rate filing is “unreasonable.”

In this brief, CALPIRG examines the implementation of rate review in California, and the results it has achieved for consumers and small employers across the state. Our analysis includes rate filings that were scheduled to go into effect between January 1, 2011 and April 1, 2014.