Starting in 2018, Missouri will no longer be the only state in the country barred from collecting information on health insurance rates.
Gov. Jay Nixon on Tuesday signed legislation requiring health insurers to file proposed rates with the Missouri Department of Insurance and the department to determine if they’re reasonable or not.
If the department finds them to be unreasonable because they’re excessive, inadequate or unfairly discriminatory, the law authorizes it to disclose that to the public, which can then comment on the proposed rates.
“So the real power here is the transparency of the rates, which is particularly important where you have a market that's highly concentrated and there are fewer participants in the market,” says John Huff, director of the Missouri Department of Insurance.
The law does not give the department the ability to approve or disapprove rates. It only gives it the ability to determine whether they’re reasonable and to publicize its findings. Still, says Huff, that’s a major step forward.
“The disinfectant of sunshine, the rate transparency, can be a very powerful tool,” he says. “We see it in many of our competitive markets. We have one of the most competitive auto markets we've had in the history of the state and that market is competitive because we have many carriers competing in that market. But also, the rates are transparent.”
Until now, Missouri was the only state that prohibited insurance regulators from collecting health insurance rates for the individual and small-group market – defined as an employer with fewer than 50 employees.
In contrast, other states require health plans to justify their rate increases. Yet others require rate filings, although they may or may not use their authority to renegotiate them.
“Up until now, Missouri was the only state in the nation without the ability to review health insurance rates, ceding that responsibility to the federal government,” Nixon said in a statement Tuesday after he signed the law. “Now, with this legislation, Missouri consumers will no longer be in the dark when shopping for health insurance plans.”
Scott Lakin, a former Missouri insurance director and now a consultant, says that by increasing transparency, the law will make it difficult for insurers to raise rates without considering its PR effects.
“It will give the department of insurance a platform to say, ‘Look, I can't do anything to make them lower their prices, but here's a press release saying that they've got a very high premium,’” he says. “And then what happens is, companies will bend over backwards not to be in that position because it hurts their sales.”
Once Missouri’s law takes effect, the federal government will no longer be involved in Missouri’s rate review process. The Affordable Care Act, or Obamacare, allows the Department of Health and Human Services to review rate increases of 10 percent or more if it determines a state does not have an effective rate review process. Now the only states deemed by HHS not to have effective rate reviews are Texas, Oklahoma and Wyoming.
Lhakpa Tsering, executive director of the Missouri Health Advocacy Alliance, says that in addition to having the potential to hold down rates, the Missouri law could exert downward pressure on the drivers of health care costs.
“Rate review doesn’t get many headlines, but being able to evaluate insurance increases before they go into effect is a big win for Missouri families,” he said in a statement. “The governor’s action is a step toward a more transparent and fair health insurance marketplace.”
Dan Margolies, editor of the Heartland Health Monitor team, is based at KCUR. You can reach him on Twitter @DanMargolies.
