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CU Testimony to Texas House on Recent Changes to the Healthcare System Created by the Patient Protection & Affordable Care Act

Testimony of Blake Hutson – Consumers Union

Texas House of Representatives Joint Hearing of Committees on Insurance & Public Health

February 27, 2012

My name is BlakeHutson; I’m here on behalf of Consumers Union, the policy and advocacy division of Consumer Reports.[1] My testimony today will briefly cover a few of the recent changes to the healthcare system created by the Patient Protection & Affordable Care Act (ACA).
Texans lack the protections afforded in many other states from unfair rate hikes and low value coverage. Health insurers simply submit rate increases to the Texas Department of Insurance (TDI) on a file and use basis without oversight and public accountability. In TDI’s June 2010 application for a federal grant to support enhanced rate review, officials noted that only rate increases over 50 percent required actuarial justification. The application went on to state that just “7 percent of an actuary’s time [was] devoted to reviewing rates for individual comprehensive, small group, and large group coverage.”
Insurers open and close blocks of businesses, carefully segmenting the marketplace, moving those with prior health conditions into risk pools with dwindling members and ever-increasing premiums. As an example, a Cigna subsidiary recently filed a 44 percent rate increase on a policy consisting of just two members inTexaswho had already faced increases totaling 87 percent over the past three years. Until 2014, when insurers can no longer discriminate on the basis of pre-existing conditions, this reality will remain.
But with the help of the ACA, the situation has improved for consumers. Two new rules are helping to bring accountability and value to health insurance where oversight and consumer protection were sorely lacking. With the help of federal funds, TDI is reviewing all rate increases of 10 percent or more to determine if the increase is reasonable. Unfortunately, this new law does not give TDI or Federal officials the much needed authority to reject unreasonable increases. However, a new federal website (and hopefully at some point TDI’s own website) will enhance transparency by listing increases, justifications, and determinations for consumers to easily access.
Additionally, starting in 2011, insurers serving the individual and small group markets must meet a minimum medical loss ratio (MLR) of at least 80 percent; a goal that multiple insurers in the state currently exceed. If carriers cannot adjust business practices and improve efficiency to meet the minimum standard, they will be required to submit rebates to policyholders or reduce premiums. Based on 2010 MLR data, it is estimated that policyholders could receive a break of $160 million this summer when MLR levels are announced and rebates are issued.
Texasshould do much more for residents struggling to afford coverage outside of the protections of a large employer. NeighboringNew Mexicohas a rate review law that allows thorough review of a company’s financial picture, opportunity for consumer input, and public transparency. Although we would encourage strengthening them even further, these new minimum value and transparency standards are an important first step for Texans and should not be lost in political or legal wrangling over the health reform law.
Texans deserve a minimum value standard for health insurance and a close look at requests to raise already unaffordable health insurance rates. The Affordable Care Act created these basic standards and we urge your committees to ensure they are preserved and improved.

[1] Consumer Reports is the world’s largest independent product-testing organization. Its advocacy division, Consumers Union, works for health reform, food and product safety, financial reform, and other consumer issues in Washington,D.C., the states, and in the marketplace.