Ask Arizonans about their health care concerns and — overwhelmingly — they will say they are worried about how much their health insurance costs and whether they will continue to be able to afford it.
Although there are many reasons for the unsustainable rise in the cost of health care coverage, one important factor is that consumers often lack the information they need to make informed decisions about what plans are right for them. Few individuals or small businesses know how much of their premium dollar goes to health care versus administrative costs like paperwork, staff salaries or profits.
While there is no ace in the hole for solving these problems, Arizona does have options to increase transparency so consumers have better information and are better protected against unreasonable rate increases. One important opportunity is through a process called rate review, which can potentially empower consumers by requiring insurers to make information on why rates are increasing publicly available.
Arizona should take the following steps to strengthen its rate review process:
• Review and prior approval: Arizona should make its rate review process more effective in protecting consumers by strengthening the Arizona Department of Insurance’s authority to prevent unreasonable rate increases from going into effect. Most consumers are ill-equipped to determine on their own whether premium increases are unreasonable or detect when insurers have used unjustified rate-setting practices. Over 30 other states already have prior approval authority for at least some insurance products, including New Mexico, Nevada and Colorado.
• Improving transparency: For all proposed rate increases or decreases, insurers should be required to file a full range of information with the Arizona Department of Insurance. In turn, the department should make this information publicly accessible, allowing consumers to make judgments about the quality and cost of their care, and enabling advocates to more constructively engage in the department’s rate review activities. Disclosure should include a short narrative including key reasons for the rate increase. Consumers should also be informed of any rate increases that have been deemed to be unjustified.
• Consumer involvement: Robust consumer participation can make a rate review program more useful to the public, and render regulatory deliberations better-informed. The Arizona Department of Insurance should post all rate increase information on a prominent and easy-to-use website in order for consumers to research rate filings. The department should also develop easy ways for consumers to comment on pending filings and hold public hearings on rate filings that it determines are significant due to the size of the proposed increase, the scope of any proposed benefit changes and the number of consumers affected.
By making these changes, Arizona could make insurance coverage more affordable by providing consumers with needed information and protections. More transparency and enhanced consumer protections could allow for a more competitive insurance marketplace, resulting in lower health insurance costs and improving coverage for individuals and small businesses in our state.
Fred Karnas is the president and CEO for St. Luke’s Health Initiatives. Diane E. Brown is executive director of the Arizona PIRG Education Fund. More information on rate review can be found at www.slhi.org or www.arizonapirgedfund.org.