April 7, 2011
Rate Review More Open, Thorough, and Fair
SANTA FE, NM – Governor Susana Martinez signed SB208 into law today, which will strengthen the state’s ability to protect consumers from rising health insurance rate hikes. The new law creates a more open process for evaluating health insurance rate increases and will enable the state to conduct a more rigorous review of potentially unjustified hikes
“This new law will help make health insurance rate review more open, thorough, and fair for New Mexico,” said Sondra Roberto, staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports. “It will shed new light on health insurers’ rating practices and help consumers and small businesses understand where their premium dollars are going. By making rate justifications public, New Mexico will be able to hold health insurers more accountable for how they spend premium dollars and better protect consumers from runaway health insurance rates.”
The new law improves New Mexico’s rate review process in a number of important ways:
Stronger standard for reviewing rate hikes: Under the new standard, rates for all health plans must be actuarially sound and reasonable, and not excessive, inadequate or unfairly discriminatory. A majority of other states already use the standard that rates may not be excessive.
More fair criteria for evaluating whether rates are reasonable: The Superintendent of Insurance will be able to consider the company’s overall financial picture in New Mexico, its compliance with the state’s new loss ratio standards, changes to benefits or plan design, and potential changes in the number of enrollees if the rates are approved.
Better transparency for consumers and businesses: The new law requires the Insurance Division to post a plain language explanation of the reasons for a rate increase on its web site, including how much of the premium has been spent on actual medical care for the prior three years, and important company financial information, such as surplus and reserves.
New avenues for consumers to participate in the rate review process: The law requires a 30-day public comment period on a proposed increase and a right to appeal a decision on rates and have the merits of the increase tested in a hearing.
Time limits on the review and appeal process: Insurance companies will be ensured a timely decision.
New protections for consumers insured in individual market “closed blocks”: Consumers insured by policies that are no longer sold to others are especially hard hit with high increases unless rate review allows broader risk spreading, as this new law would.
Michael McCauley – 415-431-6747