Affordable Care Act at 3: Holding Insurance Companies Accountable

Enacted three years ago, the health care law is making the insurance market work better for you by prohibiting some of the worst insurance industry practices that have kept affordable health coverage out of reach for millions of Americans.

As a former state insurance commissioner, I know that for too long, too many hard-working Americans paid the price for policies that handed free rein to health insurance companies. For more than a decade before the Affordable Care Act, premiums rose rapidly, straining the budgets of American families and businesses. And insurers often raised premiums without any explanation.

It wasn’t fair and it was costing you your hard-earned dollars, security, and peace of mind.

The Affordable Care Act is working to bring affordability and fairness to the marketplace by barring insurers from dropping your coverage when you get sick or placing a lifetime dollar limit on coverage. In 2014, it will prohibit discriminating against you or anyone with a pre-existing condition, such as high blood pressure, asthma, or cancer.

In an effort to slow health care spending and give all Americans more value for their health care dollars, the Affordable Care Act has brought an unprecedented level of scrutiny and transparency to health insurance rate increases by requiring an insurance company to justify a rate increase before it shows up on your bill, thereby preventing arbitrary or unnecessary costs. Insurers must provide clear information so you can understand their reasons for significant rate increases.

We know this is making a difference, and that the law is driving down health insurance premium costs in the private market by holding insurers accountable.

A report last month shows that since the rule on rate increases was implemented, the number of requests for insurance premium increases of 10% or more plummeted from 75% to an estimated 14% since the passage of the health care law. The average premium increase for all rates in 2012 was 30% below what it was in 2010. And available data suggests that this slowdown in rate increases is continuing into 2013.

Even when an insurer decides to increase rates, consumers are seeing lower rate increases than what the insurers initially requested. More than half of the rate requests for 10% or more ultimately resulted in customers receiving either a lower rate increase than requested or no hike at all.

In 2014, insurers will be required to report all proposed rate increases, not just those 10% or more, in the individual and small-group markets.

Furthermore, the rate review program works in conjunction with the 80/20 rule, which requires insurance companies to spend at least 80% (85% in the large group market) of premiums on health care, rather than administrative costs (such as executive salaries and marketing) and profits, or provide rebates to their customers. Insurers that did not meet the 80/20 rule have provided $1.1 billion in rebates that benefited about 13 million Americans, at an average of $151 per family.

Insurance benefits and costs also will become clearer to millions of Americans and small businesses starting on October 1, 2013, when they will have the opportunity to shop in a Health Insurance Marketplace in their state. You will be able to find information to make apples-to-apples comparisons of health plans by quality and price and buy the one that best fits your needs and budget.

Delivering smarter health care includes holding insurers accountable, and that is helping to hold down costs. In the past three years, we’ve seen the slowest growth in overall health care spending since the government started keeping records more than 50 years ago.

We still have challenges to face. But for the first time in recent history, we’re making real progress in driving down the rate of growth and driving up the quality of care.

By Kathleen Sebelius, Secretary of Health and Human Services

Find out more about the Effective Rate Review Program and the 80-20 rule.

Learn more about the key features of the Affordable Care Act HERE.

Follow Secretary Sebelius on Twitter at @Sebelius.