Law keeps Maine’s health insurance rates in check

An article in the March 22 edition of the Bangor Daily News with the headline “Senate Republicans reject state approval for all health insurance rate increases” creates a false impression about Maine law that needs to be clarified. As commissioner of the Department of Professional and Financial Regulation, which includes Maine’s Bureau of Insurance, I appreciate this opportunity to provide additional information.

The article may lead readers to conclude that Maine’s small businesses are not protected against unreasonable health insurance premium increases and that the superintendent of insurance does not have effective rate review authority.

In fact, Maine insurance law has always provided protections for small businesses against unreasonable rates and continues to do so, and the superintendent’s statutory authority to review small group rates is stronger now than it was before the Legislature enacted Public Law 90 last year.

Prior to the enactment of PL 90, Maine law provided that all small group health insurance rates for credible books of business could be implemented without review by the superintendent of insurance provided the insurer guaranteed a 78 percent loss ratio and promised to provide rebates to policyholders if it fell short. This process is often called “file and use.”

An insurer was only required to get the superintendent’s approval for its small group rates if the insurer would not guarantee at least a 78 percent loss ratio. Further, even when rates are submitted on a “file and use” basis, they are reviewed by the Bureau of Insurance before being implemented, and they are disapproved if they violate adjusted community rating requirements or other applicable laws.

In 2010, the federal health insurance law — the Affordable Care Act — made this guaranteed loss ratio framework mandatory across the entire health insurance market for all insurers with enough covered lives to be statistically credible. For small group insurance, the minimum loss ratio is now 80 percent, although some changes have been made to the formula.

The ACA also now requires prior review of all “potentially unreasonable” rate increases in the individual and small group markets. Under current federal regulations, “potentially unreasonable” means an increase of more than 10 percent in one year.

Here in Maine, PL 90, as clarified by PL 364, reconciled the state and federal standards. Maine adopted the federal loss ratio formula and the 80 percent threshold. The 80 percent minimum loss ratio constitutes a significant protection for Maine businesses in the small group health insurance market. In addition, under forthcoming agency rule amendments, the Bureau of Insurance will now conduct prior review of all “potentially unreasonable” rate requests.

Another important fact not mentioned in the March 22 article is that PL 90 eliminated the ability of insurers with a credible volume of business to avoid complying with the 78 percent minimum loss ratio and the rebate requirement by submitting their rates for prior approval. Now, that option is no longer available in the small group market. Insurers must maintain at least an 80 percent loss ratio and, if they fail to comply, they must provide customer rebates.

As we are witnessing, health insurance policy generates much interest and considerable debate. Regardless of one’s views, however, it is important for people to understand the protections in place to safeguard businesses and others covered by small group health insurance plans from unreasonable rate increases and violations of consumer protection laws.

Anne L. Head is commissioner of the Maine Department of Professional and Financial Regulation.