Holding insurance companies accountable

In the last few months, we have seen insurance companies from across the country announce drastic increases in their premium rates. A February report from the Secretary of Health and Human Services (HHS) Kathleen Sebelius revealed that rate increases ranged from 24 percent in Connecticut and 39 percent in California to 56 percent in Michigan. These insurance companies seem to have no problem jacking up rates, regardless of whether they are really necessary or how these increases will affect those who depend on their insurance. That is not to say that premium increases are always unjustified, but the current system doesn't offer a lot of protection for consumers against companies that raise premiums only to spend that additional money on marketing and profits. That is, until now...

Health reform changes the way insurance companies do business. First off, the new law establishes national "medical loss ratio" requirements to help regulate how insurance companies spend our premiums. Now companies in the large group market will have to spend 85 percent of premium dollars on medical care and quality improvements, and companies in the small and individual markets will have to spend 80 percent. That means insurance companies will spend a majority of our premiums on actually keeping us healthy, and if companies have money left over, they will have to return it to beneficiaries! That may seem like a no-brainer to us, but this is the first time that we've had a national standard to ensure that companies use premium dollars to pay for health care.

The new law also strengthens states' ability to review insurance companies' rate increases. States can apply for grants this year to support their rate review processes to ensure that premium increases are based on their ability to serve consumers, not just their stockholders. If states decide that a plan's premium increases are unwarranted or unreasonable, they can bar it from participating in an exchange. This law creates another line of defense for consumers to hold insurance companies accountable for their actions.

So, if you're out there thinking, "I already have insurance, this law doesn't do anything to help me," then I've got news for you. This law helps keep insurance companies honest about how they spend premiums and makes sure that companies can't arbitrarily jack up their rates without any oversight or consequences. Health reform goes a long way toward making health insurance actually work for consumers. It's a win-win.