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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

July 2011: 

Private Health Insurance: 

State Oversight of Premium Rates: 

GAO-11-701: 

GAO Highlights: 

Highlights of GAO-11-701, a report to congressional requesters. 

Why GAO Did This Study: 

With premiums increasing for private health insurance, questions have 
been raised about the extent to which increases are justified. 
Oversight of the private health insurance industry is primarily the 
responsibility of states. In 2010, the Patient Protection and 
Affordable Care Act required the Department of Health and Human 
Services (HHS) to award grants to assist states in their oversight of 
premium rates. GAO was asked to provide information on state oversight 
of premium rates. In this report, GAO describes (1) states’ practices 
for overseeing health insurance premium rates in 2010, including the 
outcomes of premium rate reviews; and (2) changes that states that 
received HHS rate review grants have begun making to enhance their 
oversight of premium rates. 

GAO surveyed officials from insurance departments in 50 states and the 
District of Columbia (referred to as states) about their practices for 
overseeing premium rates in 2010 and changes they have begun making to 
enhance their oversight. GAO received responses from all but one 
state. GAO also interviewed officials from California, Illinois, 
Maine, Michigan, and Texas to gather additional information on state 
practices. GAO selected these states based on differences in their 
authority to oversee premium rates, and proposed changes to their 
oversight, their size, and their geographic location. GAO also 
interviewed officials from advocacy groups and two large carriers to 
obtain contextual information. 

What GAO Found: 

GAO found that oversight of health insurance premium rates—primarily 
reviewing and approving or disapproving rate filings submitted by 
carriers—varied across states in 2010. While nearly all—48 out of 50—
of the state officials who responded to GAO’s survey reported that 
they reviewed rate filings in 2010, the practices reported by state 
insurance officials varied in terms of the timing of rate filing 
reviews, the information considered in reviews, and opportunities for 
consumer involvement in rate reviews. Specifically, respondents from 
38 states reported that all rate filings reviewed were reviewed before 
the rates took effect, while other respondents reported reviewing at 
least some rate filings after they went into effect. Survey 
respondents also varied in the types of information they reported 
reviewing. While nearly all survey respondents reported reviewing 
information such as trends in medical costs and services, fewer than 
half of respondents reported reviewing carrier capital levels compared 
with state minimums. Some survey respondents also reported conducting 
comprehensive reviews of rate filings, while others reported reviewing 
little information or conducting cursory reviews. In addition, while 
14 survey respondents reported providing consumers with opportunities 
to be involved in premium rate oversight, such as participation in 
rate review hearings or public comment periods, most did not. Finally, 
the outcomes of states’ reviews of rate filings varied across states 
in 2010. Specifically, survey respondents from 5 states reported that 
over 50 percent of the rate filings they reviewed in 2010 were 
disapproved, withdrawn, or resulted in rates lower than originally 
proposed, while survey respondents from 19 states reported that these 
outcomes occurred from their rate reviews less than 10 percent of the 
time. 

GAO’s survey of state insurance department officials found that 41 
respondents from states that were awarded HHS rate review grants 
reported that they have begun making changes in order to enhance their 
states’ abilities to oversee health insurance premium rates. For 
example, about half of these respondents reported taking steps to 
either review their existing rate review processes or develop new 
processes. In addition, over two-thirds reported that they have begun 
to make changes to increase their capacity to oversee premium rates, 
including hiring staff or outside actuaries, and improving the 
information technology systems used to collect and analyze rate filing 
data. Finally, more than a third reported that their states have taken 
steps-—such as introducing or passing legislation-—in order to obtain 
additional legislative authority for overseeing health insurance 
premium rates. 

HHS and the National Association of Insurance Commissioners (NAIC) 
reviewed a draft of this report. In its written comments, HHS 
highlighted the steps it is taking to improve transparency, help 
states improve their health insurance rate review, and assure 
consumers that any premium increases are being spent on medical care. 
HHS and NAIC provided technical comments, which were incorporated as 
appropriate. 

View [hyperlink, http://www.gao.gov/products/GAO-11-701] or key 
components. For more information, contact John E. Dicken at (202) 512-
7114 or dickenj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Reported Practices for Overseeing Premium Rates, as Well as Outcomes 
of Rate Reviews, Varied across States in 2010: 

State Officials Reported Taking Steps to Improve Processes, Increase 
Capacity, and Obtain Additional Legislative Authority to Oversee 
Premium Rates: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Additional Results from Our Survey on State Oversight of 
Health Insurance Premium Rates: 

Appendix III: Carrier Capital Levels: 

Appendix IV: Comments from the Department of Health and Human Services: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Selected Types of Information State Survey Respondents 
Reported Considering When Reviewing Rate Filings during 2010: 

Table 2: Reported Opportunities for Consumer Involvement in States' 
Rate Review Practices in 2010: 

Table 3: Number of Rate Filings Received, Reviewed, and Disapproved, 
Withdrawn, or Resulting in Rates Lower Than Originally Proposed in 
2010 in the Individual, Small-Group, and Large-Group Markets, by State: 

Table 4: Actuarial Justifications Required and Reviewed in 2010, by 
State: 

Table 5: Reported Capacity and Resources to Review Rate Filings in 
2010, by State: 

Table 6: Summary of Content Analysis of Reported Changes to State 
Oversight of Health Insurance Premium Rates: 

Table 7: Median Risk-Based Capital Ratios by Asset Size, 2005-2010: 

Figure: 

Figure 1: Percentage and Reported Number of Rate Filings That Were 
Disapproved, Withdrawn, or Resulted in Lower Rates Than Originally 
Proposed by State in 2010: 

Abbreviations: 

CRS: Congressional Research Service: 

HHS: Department of Health and Human Services: 

HMO: health maintenance organization: 

NAIC: National Association of Insurance Commissioners: 

PPACA: Patient Protection and Affordable Care Act: 

RBC: risk-based capital: 

SERFF: System for Electronic Rate and Form Filing: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 29, 2011: 

The Honorable Tom Harkin: 
Chairman: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

The Honorable Dianne Feinstein: 
United States Senate: 

In 2009, about 173 million nonelderly Americans, about 65 percent of 
the U.S. population under the age of 65, had private health insurance 
coverage, either through individually purchased or employer-based 
private health plans. The cost of this health insurance coverage 
continues to rise. In a 2010 survey, over three-quarters of U.S. 
consumers with individually purchased private health plans reported 
health insurance premium increases. Of those reporting increases, the 
average premium increase was 20 percent.[Footnote 1] A separate survey 
found that premiums for employer-based coverage more than doubled from 
2000 to 2010.[Footnote 2] Policymakers have raised questions about the 
extent to which these increases in health insurance premiums are 
justified and could adversely affect consumers. 

Oversight of the private health insurance industry is primarily the 
responsibility of individual states.[Footnote 3] This includes 
oversight of health insurance premium rates, which are actuarial 
estimates of the cost of providing coverage over a period of time to 
policyholders and enrollees in a health plan. While oversight of 
private health insurance, including premium rates, is primarily a 
state responsibility, the 2010 Patient Protection and Affordable Care 
Act (PPACA) established a role for the Department of Health and Human 
Services (HHS) by requiring the Secretary of HHS to work with states 
to establish a process for the annual review of unreasonable premium 
increases.[Footnote 4] In addition, PPACA required the Secretary of 
HHS to carry out a program to award grants to assist states in their 
review practices.[Footnote 5] Since the enactment of PPACA, members of 
Congress and others have continued to raise questions about rising 
health insurance premium rates and states' practices for overseeing 
them. 

You asked us to review certain aspects of states' oversight of health 
insurance premium rates. This report describes (1) states' practices 
for overseeing health insurance premium rates in 2010, including the 
outcomes of premium rate reviews; and (2) changes that states that 
received HHS rate review grants have begun making to enhance their 
oversight of health insurance premium rates. 

To describe states' practices for overseeing health insurance premium 
rates in 2010, including the outcomes of premium rate reviews, we 
surveyed officials from the insurance departments[Footnote 6] of all 
50 states and the District of Columbia (collectively referred to as 
"states"). We received responses from all but one state.[Footnote 7] 
However, not all states responded to each question in the survey. 
Additionally, some survey respondents reported that they could not 
provide data for all questions. We conducted the survey from February 
25, 2011, through April 4, 2011, collecting information primarily on 
state practices for overseeing premium rates in calendar year 2010. In 
order to obtain more detailed information about state oversight of 
health insurance premium rates in 2010, we also conducted interviews 
with insurance department officials from five selected states. We 
selected these states--California, Illinois, Maine, Michigan, and 
Texas--based on differences among the five states in terms of their 
(1) state insurance departments' authority to oversee premium rates, 
(2) proposed changes to their existing practices for overseeing 
premium rates, (3) size, and (4) geographic location.[Footnote 8] 
Additionally, in order to obtain contextual information on states' 
practices for overseeing premium rates, we interviewed other experts 
and officials from relevant organizations, including the National 
Association of Insurance Commissioners (NAIC), the American Academy of 
Actuaries, America's Health Insurance Plans, two large carriers based 
on their number of covered lives,[Footnote 9] NAIC consumer 
representatives (individuals who represent consumer interests at 
meetings with NAIC), and various advocacy groups such as Families USA 
and Consumers Union. 

To describe changes that states that received HHS rate review grants 
have begun making to enhance their oversight of health insurance 
premium rates, we collected information about state changes in our 
survey described above from the 45 state survey respondents that were 
awarded HHS rate review grants in 2010 entitled, "Grants to States for 
Health Insurance Premium Review-Cycle I" (referred to as Cycle I rate 
review grants).[Footnote 10] We also asked about these changes in 
oversight during our interviews with state insurance department 
officials from the five selected states and in other interviews with 
experts and relevant organizations described above. Additionally, we 
interviewed officials from the Center for Consumer Information and 
Insurance Oversight within the Centers for Medicare & Medicaid 
Services. We also reviewed portions of the states' Cycle I rate review 
grant applications submitted to HHS and other relevant HHS documents. 
See appendix I for a more detailed description of our methodology. 

We conducted this performance audit from September 2010 through June 
2011 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

The majority of Americans receive their health coverage through 
private health insurance, either by purchasing coverage directly or 
receiving coverage through their employer, and many of those with 
private coverage are enrolled in plans purchased from state-licensed 
or regulated carriers. An estimated 173 million nonelderly Americans, 
65 percent, received health coverage through private insurance in 
2009. The remainder of Americans either received their health coverage 
through government health insurance, such as Medicare and Medicaid, or 
were uninsured.[Footnote 11] 

In general, those who obtain private health insurance do so in one of 
three market segments: individual, small-group, and large-group. 
Policyholders in the individual market purchase private health 
insurance plans directly from a carrier--not in connection with a 
group health plan. In 2009 an estimated 17 million nonelderly 
Americans obtained individual private health insurance coverage. 
[Footnote 12] In the small-group market, enrollees generally obtain 
health insurance coverage through a group health plan offered by a 
small employer, and in the large-group market, enrollees generally 
obtain coverage through a group health plan offered by a large 
employer.[Footnote 13] In 2009, an estimated 156 million nonelderly 
Americans obtained private health insurance through employer-based 
group plans offered by either small or large employers. While most 
small-group coverage is purchased from state-licensed or regulated 
plans, most large-group coverage is purchased from employer self-
funded plans not subject to state licensing or regulation. However, 
there are some fully-insured large-group plans, which are subject to 
state regulation. 

Premium rates are actuarial estimates of the cost of providing 
coverage over a period of time to policyholders and enrollees in a 
health plan. To determine rates for a specific insurance product, 
carriers estimate future claims costs in connection with the product 
and then the revenue needed to pay anticipated claims and nonclaims 
expenses, such as administrative expenses. Premium rates are usually 
filed as a formula that describes how to calculate a premium for each 
person or family covered, based on information such as geographic 
location, underwriting class, coverage and co-payments, age, gender, 
and number of dependents. 

States' Roles in Oversight of Health Insurance Premium Rates: 

The McCarran-Ferguson Act provides states with the authority to 
regulate the business of insurance, without interference from federal 
regulation, unless federal law specifically provides otherwise. 
Therefore, states are primarily responsible for overseeing private 
health insurance premium rates in the individual and group markets in 
their states. Through laws and regulations, states establish standards 
governing health insurance premium rates and define state insurance 
departments' authority to enforce these standards. In general, the 
standards are used to help ensure that premium rates are adequate, not 
excessive, reasonable in relation to the benefits provided, and not 
unfairly discriminatory. 

In overseeing health insurance premium rates, state insurance 
departments may review rate filings submitted by carriers. A rate 
filing may include information on premium rates a carrier proposes to 
establish, as well as documentation justifying the proposed rates, 
such as actuarial or other assumptions and calculations performed to 
set the rate. According to the Congressional Research Service (CRS) 
and others, most states require carriers to submit rate filings to 
state departments of insurance prior to implementation of new rates or 
rate changes. 

The authority of state insurance departments to review rate filings 
can vary. Some insurance departments have the authority to approve or 
disapprove all rate filings before they go into effect, while others 
do not have any authority to approve or disapprove rate filings. 
Further, in some states, authority to approve or disapprove rate 
filings varies by market.[Footnote 14] 

According to a report published by CRS, in 2010, insurance departments 
in 19 states were authorized by their state to approve or disapprove 
proposed premium rates in all markets before they went into effect-- 
known as prior approval authority.[Footnote 15] Officials in states 
with prior approval authority may review a carrier's rate filing using 
the state's standards governing health insurance premium rates. In 
some cases, the state officials may also consider input from the 
public on the proposed rate, which can be obtained, among other ways, 
through public hearings or public comment periods. If a proposed rate 
does not meet a state's standards, officials in states with prior 
approval authority can, among other things, deny the proposed rate or 
request that the carrier submit a new rate filing that addresses the 
issues that the state identified during its review. If a proposed rate 
meets a state's standards, the officials may approve the rate filing. 
However, in some states, if the officials do not review a proposed 
rate filing and take action within a specified time period, the 
carrier's submitted rate filing is deemed approved under state law. 

According to CRS, insurance departments in another 10 states were 
authorized to disapprove rate filings in all markets in 2010, but not 
to approve rate filings before a carrier could begin using the premium 
rate or rates proposed in the filing. In 9 of these states, carriers 
were required to submit rate filings prior to the effective date of 
the proposed rate--known as file and use authority. In one state, 
carriers could begin using a new premium rate and then file it with 
the state--known as use and file authority. In departments with file 
and use authority or use and file authority, the state officials may 
review a carrier's rate filing using the state's standards governing 
health insurance rates. If a proposed rate does not meet these 
standards, the officials can, among other things, deny the proposed 
premium rate or request that the carrier submit a new rate filing that 
addresses the issues that the state identified during its review. 
However, the state officials do not have the authority to approve a 
rate filing before the proposed premium rate goes into effect, and 
unless the rate filing has been disapproved, a carrier may begin using 
the new premium rate as of its effective date. 

In six states, insurance departments were not authorized to approve or 
disapprove rate filings in any market in 2010, according to CRS. In 
three of these states, a carrier was required to submit rate filings 
for informational purposes only, known as information only authority. 
In the other three states, carriers were not required to submit rate 
filings with the states. 

In addition, in one state, carriers were not required to file rates 
for approval or disapproval each time the carrier proposed to change 
premium rates. Instead, carriers were required to file premium rates 
with the form that was filed when the plan was initially offered on 
the market--this form includes the language in the insurance contract. 
This is known as file with form authority. 

According to CRS, in the remaining 15 states, authority to approve or 
disapprove rate filings varied by market in 2010. For example, a state 
insurance department may have prior approval authority in the 
individual market, but have information only authority in the small- 
group and large-group markets subject to their regulation. 

HHS's Role in Oversight of Health Insurance Premium Rates: 

PPACA, signed into law in March 2010, established a role for HHS by 
requiring the Secretary of HHS to work with states to establish a 
process for the annual review of unreasonable premium increases. PPACA 
also established a state grant program to be administered by HHS 
beginning in fiscal year 2010. 

HHS has taken steps to work with states to establish a process for 
reviewing premium rate increases each year. In December 2010, HHS 
published a proposed rule,[Footnote 16] and in May 2011, HHS issued a 
final rule that established a threshold for review of rate increases 
for the individual and small-group markets and outlined a process by 
which certain rate increases would be reviewed either by HHS or a 
state.[Footnote 17] The final rule also included a process by which 
HHS would determine if a state's existing rate review program was 
effective.[Footnote 18] HHS would review rates in states determined 
not to have an effective rate review program; in these instances, HHS 
would determine if a rate increase over an applicable threshold in the 
individual and small-group market was unreasonable based on whether it 
was excessive, unjustified, or unfairly discriminatory.[Footnote 19] 
In developing this final rule, HHS worked with states to understand 
various states' rate review authorities. 

HHS has also begun administering a state grant program to enhance 
states' existing rate review processes and provide HHS with 
information on state trends in premium increases in health insurance 
coverage. PPACA established this 5-year, $250 million state grant 
program to be administered by HHS, beginning in fiscal year 2010. HHS 
announced the first cycle of rate review grants in June 2010, awarding 
$46 million ($1 million per state) to the 46 states that applied for 
the grants.[Footnote 20] According to HHS, grant recipients proposed 
to use this Cycle I grant funding in a number of ways, including 
seeking additional legislative authority to review premium rate 
filings, expanding the scope of their reviews, improving the rate 
review process, and developing and upgrading technology. HHS announced 
the second cycle of rate review grants in February 2011 with $199 
million available in grant funding to states.[Footnote 21] 

Reported Practices for Overseeing Premium Rates, as Well as Outcomes 
of Rate Reviews, Varied across States in 2010: 

Through our survey and interviews with state officials, we found that 
oversight of health insurance premium rates--primarily reviewing and 
approving or disapproving rate filings submitted by carriers--varied 
across states in 2010. In addition, the reported outcomes of rate 
filing reviews varied widely across states in 2010, in particular, the 
extent to which rate filings were disapproved, withdrawn, or resulted 
in lower rates than originally proposed. 

While Nearly All State Officials Reported Reviewing Premium Rates in 
2010, the Timing of Reviews, Information Reviewed, and Extent of 
Consumer Involvement in Reviews Varied: 

Nearly all--48 out of 50--of the state officials who responded to our 
survey reported that they reviewed rate filings in 2010.[Footnote 22] 
Further, respondents from 30 states--over two-thirds of the states 
that provided data on the number of rate filings reviewed in 2010--
reported that they reviewed at least 95 percent of rate filings 
received in 2010.[Footnote 23] Among the survey respondents that 
reported reviewing less than 95 percent of rate filings in 2010, some 
reported that a portion of the rate filings were deemed approved 
without a review because they did not approve or disapprove them 
within a specified time period. Others reported that they did not 
review rate filings in certain markets. For example, respondents from 
4 of these states reported that they did not review any rate filings 
received in the large-group market subject to their regulation in 
2010. In addition, some respondents that reported reviewing rate 
filings in 2010 reported that they did not receive rate filings in 
certain markets. For example, respondents from 9 states--nearly one 
quarter of the states that provided information by market--reported 
that they did not receive rate filings in the large-group market in 
2010. (See appendix II for more information on the results of our 
survey.)[Footnote 24] 

While our survey responses indicated that most states reviewed most of 
the rate filings they received in 2010, the responses to our survey 
also showed that how states reviewed the rate filings varied in 2010. 
Specifically, the practices reported by state insurance officials 
varied in terms of (1) the timing of rate filing reviews--whether rate 
filings were reviewed before or after the rates took effect, (2) the 
information considered during reviews, and (3) opportunities for 
consumer involvement in rate reviews. 

Timing of Rate Reviews: 

Respondents from 38 states reported that all rate filings they 
reviewed were reviewed before the rates took effect, while respondents 
from 8 states reported reviewing at least some rate filings after the 
rates went into effect.[Footnote 25] Some of the variation in the 
timing of rate filing reviews was consistent with differences across 
states in their reported authorities for state insurance departments 
to approve or disapprove rate filings. For example, survey respondents 
from some states reporting prior approval authority--such as Maryland 
and West Virginia--were among respondents from the 38 states that 
reported that all rate filings the state reviewed were reviewed before 
the rates took effect in 2010. Similarly, survey respondents from 
another state--Utah--reported that at least some rate filings were 
reviewed after the rates went into effect, because the department had 
file and use authority and it was not always possible to review rate 
filings before they went into effect. However, not all variation in 
states' practices was consistent with differences in state insurance 
departments' authorities to review and approve or disapprove rate 
filings. For example, survey respondents from California--who 
indicated that they did not have the authority to approve rate filings 
before carriers could begin using the rates--reported that all rate 
filings reviewed in 2010 were reviewed prior to the rates going into 
effect. 

Information Considered during Rate Reviews: 

According to our survey results and interviews with state insurance 
department officials, the information considered as a part of the 
states' reviews of rate filings varied. For example, as shown in table 
1, our survey results indicated that nearly all survey respondents 
reported reviewing information such as medical trend, a carrier's rate 
history, and reasons for rate revisions. In contrast, fewer than half 
of state survey respondents reported reviewing carrier capital levels 
compared with states' minimum requirements or compared with an upper 
threshold.[Footnote 26] (See appendix III for more detailed 
information about carrier capital levels.) Overall, when asked to 
select from a list of 13 possible types of information considered 
during rate filing reviews in 2010, 7 respondents reported that they 
reviewed fewer than 5 of the items that we listed, while 13 
respondents reported reviewing more than 10 items.[Footnote 27] 

Table 1: Selected Types of Information State Survey Respondents 
Reported Considering When Reviewing Rate Filings during 2010: 

Type of information considered[A]: Medical trend; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 44 (92%). 

Type of information considered[A]: Rate history (for rate changes 
only); 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 44 (92%). 

Type of information considered[A]: Reasons for rate revision (for rate 
changes only); 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 43 (90%). 

Type of information considered[A]: Benefits provided; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 40 (83%). 

Type of information considered[A]: Medical loss ratio; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 40 (83%). 

Type of information considered[A]: Utilization of services; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 32 (67%). 

Type of information considered[A]: Carrier administrative costs; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 32 (67%). 

Type of information considered[A]: Enrollee risk profiles/rating 
characteristics; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 28 (58%). 

Type of information considered[A]: Cost sharing; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 28 (58%). 

Type of information considered[A]: Carrier profit; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 27 (56%). 

Type of information considered[A]: Carrier reserves (i.e., 
liabilities); 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 24 (50%). 

Type of information considered[A]: Carrier capital levels compared 
with state minimum requirements; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 18 (38%). 

Type of information considered[A]: Carrier capital levels compared 
with an upper threshold; 
Number of state survey respondents that reported considering the type 
of information when reviewing rate filings (as a percentage of 
responding states that reviewed rate filings during 2010): 8 (17%). 

Source: GAO analysis. 

Note: Forty-eight states reported that they reviewed at least one rate 
filing in 2010. 

[A] List created by GAO based on information from NAIC and HHS. 

[End of table] 

Some survey respondents also reported conducting relatively more 
comprehensive reviews and analyses of rate filings, while other 
respondents reported reviewing relatively little information or 
conducting cursory reviews of the information they received. For 
example, survey respondents from Texas reported that for all filings 
reviewed, all assumptions, including the experience underlying the 
assumptions, were reviewed by department actuaries for reasonableness, 
while respondents from Pennsylvania and Missouri reported that they 
did not always perform a detailed review of information provided in 
rate filings. Respondents from Pennsylvania reported that while they 
compared data submitted by carriers in rate filings to the carriers' 
previous rate filings, the state's department of insurance did not 
have adequate capacity to perform a detailed review of all rate 
filings received from carriers. Respondents from Missouri reported 
that they looked through the information provided by carriers in rate 
filings in 2010, but that they did not have the authority to do a more 
comprehensive review. 

We also found that the type of information states reported reviewing 
in 2010 varied by market or product type. For example, officials from 
Maine told us that they reviewed information such as medical trend and 
benefits provided when reviewing rate filings in the individual market 
and under certain circumstances in the small-group market. However, 
they told us that they conducted a more limited review in the small- 
group market if the carrier's rate filing guaranteed a medical loss 
ratio of at least 78 percent and the plan covered more than 1,000 
lives.[Footnote 28] In another example, Michigan officials reported 
that, in 2010, they reviewed a number of types of information for 
health maintenance organization (HMO) rate filings, including rating 
methods and charts that showed the levels of premium rate increases 
from the previous year. These officials told us that the state 
required HMO rates to be "fair, sound, and reasonable" in relation to 
the services provided, and that HMOs had to provide sufficient data to 
support this. In contrast, the officials told us that the state's 
requirement for commercial carriers in the individual market was to 
meet a medical loss ratio of 50 to 65 percent, depending on certain 
characteristics of the insurance products. 

While state survey respondents reported a range of information that 
they considered during rate filing reviews, over half of the 
respondents reported independently verifying at least some of this 
information. The remaining respondents reported that they did not 
independently verify any information submitted by carriers in rate 
filings in 2010.[Footnotes 29, 30] Survey respondents that reported 
independently verifying information for at least some rates filings in 
2010 also reported different ways in which information they received 
from carriers was independently verified. For example, survey 
respondents from Rhode Island reported that the standard of 
independent verification varied depending on the rate filing, and that 
the steps taken included making independent calculations with 
submitted rate filing data and comparing these calculations with 
external sources of data.[Footnote 31] In another example, respondents 
from Michigan reported that in 2010 the department of insurance had 
staff conduct on-site reviews of carrier billing statements in the 
small and large-group markets in order to verify the information 
submitted in rate filings. 

Opportunities for Consumer Involvement in Rate Reviews: 

Survey respondents from 14 states reported providing opportunities for 
consumers to be involved in the oversight of health insurance premium 
rates in 2010.[Footnote 32] Our survey results indicated that these 
consumer opportunities varied and included opportunities to 
participate in rate review hearings--which allow consumers and others 
to present evidence for or against rate increases--public comment 
periods, or on consumer advisory boards. 

Survey respondents from six states reported conducting rate review 
hearings in at least one market in 2010 to provide consumers with 
opportunities to be involved in the oversight of premium rates. 
[Footnote 33] (See table 2 for information on reported opportunities 
for consumer involvement in states' rate review practices in 2010.) 
For example, officials from Maine that we interviewed told us that the 
insurance department held rate hearings for two large carriers in 2010 
and that the size of the rate increase and the number of people 
affected were among the factors considered in determining whether to 
hold a rate hearing. The officials explained that if there is a 
hearing, the Maine Bureau of Insurance issues a notice and interested 
parties, such as the attorney general or consumer organizations, can 
participate by presenting evidence for or against rate increases. 
Maine officials said that, before rate review hearings are held, 
carriers share information about the rate filing, but that additional 
details identified at a hearing may trigger a request for further 
information. Maine officials said that after the state reviews all of 
the information, the state either approves the rate or disapproves the 
rate with an explanation of what the state would approve. 

Table 2: Table 2: Reported Opportunities for Consumer Involvement in 
States' Rate Review Practices in 2010: 

State: California; 
Rate hearings: [Empty]; 
Public comment periods: [Empty]; 
Other[A]: [Check]. 

State: Connecticut; 
Rate hearings: [Check]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: Iowa; 
Rate hearings: [Check]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: Maine; 
Rate hearings: [Check]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: Michigan; 
Rate hearings: [Check]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: New Mexico; 
Rate hearings: [Check]; 
Public comment periods: [Empty]; 
Other[A]: [Empty]. 

State: New York; 
Rate hearings: [Empty]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: Oregon; 
Rate hearings: [Empty]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: Pennsylvania; 
Rate hearings: [Empty]; 
Public comment periods: [Check]; 
Other[A]: [Empty]. 

State: Rhode Island; 
Rate hearings: [Check]; 
Public comment periods: [Check]; 
Other[A]: [Check]. 

State: Texas; 
Rate hearings: [Empty]; 
Public comment periods: [Empty]; 
Other[A]: [Check]. 

State: Washington; 
Rate hearings: [Empty]; 
Public comment periods: [Empty]; 
Other[A]: [Check]. 

State: West Virginia; 
Rate hearings: [Empty]; 
Public comment periods: [Empty]; 
Other[A]: [Check]. 

State: Wisconsin; 
Rate hearings: [Empty]; 
Public comment periods: [Empty]; 
Other[A]: [Check]. 

Source: GAO analysis. 

Note: Respondents from 47 states reported that they reviewed at least 
one rate filing in 2010 and responded to our question about consumer 
involvement. Of these 47 states, survey respondents in 33 states 
reported that they did not provide consumers with any opportunities to 
be involved in the rate review process in 2010. 

[A] Other types of opportunities that survey respondents reported 
providing to consumers included: consumer advisory boards/panels, 
providing information about rate filings on the insurance department's 
web site, and making rate filings available through the state's open 
records process. 

[End of table] 

Survey respondents from eight states reported that they provided 
consumers with opportunities to participate in public comment periods 
for premium rates in 2010. For example, respondents from Pennsylvania 
reported that rate filings were posted in the Pennsylvania Bulletin--a 
publication that provides information on rulemaking in the state--for 
30 days for public review and comment. In addition, officials from 
Maine told us that they did not make decisions on rate filings until 
consumers had an opportunity to comment on proposed rate changes. 
These officials added that they are required to wait at least 40 days 
after carriers notify policyholders of a proposed rate change before 
making a decision, providing consumers with an opportunity to comment. 

Survey respondents from six states reported providing consumers with 
other opportunities to be involved in the oversight process. For 
example, respondents from two states--Rhode Island and Washington-- 
reported that they provided consumers with opportunities to 
participate in consumer advisory boards in 2010. In addition, 
respondents from Texas reported that rate filings were available to 
consumers upon request and that the Texas Department of Insurance held 
stakeholder meetings during which consumer representatives 
participated in discussions about rate review regulations. 

Outcomes of Premium Rate Reviews Varied in 2010: 

The outcomes of states' reviews of premium rates in 2010 also varied. 
While survey respondents from 36 states reported that at least one 
rate filing was disapproved, withdrawn, or resulted in a rate lower 
than originally proposed in 2010,[Footnote 34] the percentage of rate 
reviews that resulted in these types of outcomes varied widely among 
these states.[Footnote 35] Specifically, survey respondents from 5 of 
these states--Connecticut, Iowa, New York, North Dakota, and Utah--
reported that over 50 percent of the rate filings they reviewed in 
2010 were disapproved, withdrawn, or resulted in rates lower than 
originally proposed, while survey respondents from 13 of these states 
reported that these outcomes occurred in less than 10 percent of rate 
reviews. An additional 6 survey respondents reported that they did not 
have any rate filings that were disapproved, withdrawn, or resulted in 
lower rates than originally proposed in 2010. (Figure 1 provides 
information on the percentage and reported number of rate filings that 
were disapproved, withdrawn, or resulted in lower rates than 
originally proposed by state in 2010.) 

Figure 1: Percentage and Reported Number of Rate Filings That Were 
Disapproved, Withdrawn, or Resulted in Lower Rates Than Originally 
Proposed by State in 2010: 

[Refer to PDF for image: horizontal bar graph] 

North Dakota: 75% (18); 
New York: 71% (25); 
Connecticut: 63% (37); 
Utah: 60% (31); 
Iowa: 55% (28); 
Colorado: 48% (190); 
South Dakota: 47% (16); 
Oregon: 41% (21); 
Pennsylvania: 37% (52); 
New Hampshire: 36% (26); 
Vermont: 36% (26); 
Delaware: 33% (29); 
Massachusetts: 29% (19); 
Ohio: 29% (101); 
Alaska: 25% (1); 
New Mexico: 25% (19); 
Tennessee: 19% (5); 
Alabama: 19% (22); 
Kansas: 18% (51); 
Maryland: 15% (22); 
Minnesota: 12% (20); 
Arkansas: 12% (4); 
West Virginia: 10% (4); 
Maine: 8% (4); 
Washington: 7% (44); 
Michigan: 7% (12); 
California: 6% (14); 
Georgia: 5% (19); 
South Carolina: 5% (21); 
Florida: 5% (10); 
Nevada: 5% (5); 
Texas: 5% (17); 
New Jersey: 4% (4); 
Kentucky: 4% (6); 
Hawaii: 4% (1); 
North Carolina: 1% (5). 

Source: GAO analysis. 

Notes: Respondents from six states--Arizona, Idaho, Missouri, 
Nebraska, Wisconsin, and Wyoming--reported that they did not have any 
rate filings that were disapproved, withdrawn, or resulted in lower 
rates than originally proposed in 2010. Respondents from six states--
the District of Columbia, Mississippi, Montana, Oklahoma, Rhode 
Island, and Virginia--did not respond to the question or did not have 
the information available to answer the question. Respondents from two 
states reported that their states did not review rate filings in 2010. 
One state, Indiana, did not complete a survey. 

States' determinations to disapprove rates may vary. For example, 
regulators in one state might disapprove a rate filing for not 
containing complete information, while regulators in another state 
might remind the carrier to submit the required information without 
automatically disapproving the rate. 

Officials from some states reported that since rate review takes place 
over time, the rate filings on which action is taken in 2010 may not 
be exactly the same set of rate filings received in 2010. 

[End of figure] 

Some of the state survey respondents reported that at least one rate 
filing was disapproved, withdrawn, or resulted in rates lower than 
originally proposed in 2010 even though they did not have explicit 
authority to approve rate filings in 2010. For example, officials from 
the California Department of Insurance reported that even though the 
department did not have the authority to approve rate filings and 
could only disapprove rate filings if they were not compliant with 
certain state standards, such as compliance with a 70 percent lifetime 
anticipated loss ratio,[Footnote 36] the department negotiated with 
carriers to voluntarily reduce proposed rates in 2010. Survey 
respondents from California reported that 14 out of 225 rate filings 
in 2010 were disapproved, withdrawn, or resulted in rates lower than 
originally proposed. Specifically, officials from the California 
Department of Insurance told us that they negotiated with carriers to 
reduce proposed rates by 2 percentage points to 25 percentage points 
in 2010. These officials also told us that they negotiated with one 
carrier not to raise rates in 2010 although the carrier had originally 
proposed a 10-percent average increase in rates. In another example, 
although survey respondents from Alabama reported that they did not 
have prior approval authority, they reported that 22 rate filings were 
disapproved, withdrawn, or resulted in rates lower than originally 
proposed in 2010. 

States also varied in the markets in which rates were disapproved, 
withdrawn, or resulted in rates lower than originally proposed in 
2010. For example, survey respondents from nine states--Alaska, 
Arkansas, Hawaii, Kansas, Kentucky, Maine, Nevada, New Jersey, and 
North Carolina--reported that while they reviewed rate filings in 
multiple markets, only reviews for the individual market resulted in 
rates that were disapproved, withdrawn, or resulted in rates lower 
than originally proposed. In other states, respondents reported that 
rate filings in multiple markets resulted in these types of outcomes 
in 2010. For example, survey respondents from 12 states reported that 
rate filings in all three markets resulted in these types of outcomes 
in 2010. 

State Officials Reported Taking Steps to Improve Processes, Increase 
Capacity, and Obtain Additional Legislative Authority to Oversee 
Premium Rates: 

Our survey of state insurance department officials found that 41 
respondents from states that were awarded Cycle I HHS rate review 
grants have begun making three types of changes in order to enhance 
their states' abilities to oversee health insurance premium rates. 
Specifically, respondents reported that they have taken steps in order 
to (1) improve their processes for reviewing premium rates, (2) 
increase their capacity to oversee premium rates, and (3) obtain 
additional legislative authority for overseeing premium rates. 
[Footnotes 37, 38] 

Improve rate review processes. More than four-fifths of the state 
survey respondents that reported making changes to their oversight of 
premium rates reported that they had taken various steps to improve 
the processes used for reviewing health insurance premium rates. 
[Footnote 39] These steps consisted primarily of the following: 

* Examining existing rate review processes to identify areas for 
improvement. Twenty-two survey respondents reported taking steps to 
either review their existing rate review processes or develop new 
processes. More than two-thirds of these 22 respondents reported that 
their state contracted with outside actuarial or other consultants to 
review the states' rate review processes and make recommendations for 
improvement. For example, respondents from Louisiana--who, according 
to officials, previously did not review most premium rate filings 
because they did not have the authority to approve or disapprove 
rates--reported that they had contracted with an actuary to help them 
develop a rate review process.[Footnote 40] In another example, 
respondents from North Carolina reported that an outside actuarial 
firm independently reviewed the department's health insurance rate 
review process and recommended ways that the department could improve 
and enhance its review process. Similarly, respondents from Tennessee 
reported that they had obtained information from contract actuaries on 
how to enhance the state's review of rate filings. In addition, four 
of these respondents reported taking steps to develop standardized 
procedures for reviewing rate filings. For example, respondents from 
Illinois reported that their insurance department is developing 
protocols for the collection, analysis, and publication of rate 
filings. 

* Changing information that carriers are required to submit in rate 
filings. Thirteen survey respondents reported taking steps to change 
the rate filing information that carriers are required to submit to 
the state insurance department in order to improve reviews of rate 
filings. For example, respondents from Oregon reported that they will 
require carriers to provide in their rate filings a detailed breakdown 
of medical costs and how premiums are spent on medical procedures and 
services. In another example, respondents from Virginia reported that 
their state is expanding the information required from carriers in 
rate filing submissions by developing a uniform submission checklist. 

* Incorporating additional data or analyses in rate filing reviews. 
Eleven survey respondents reported purchasing data or conducting 
additional data analyses in order to improve the quality of their 
states' rate filing reviews. For example, respondents from Ohio 
reported taking steps to obtain national claims data on health costs 
which, according to the respondents, would enable the department of 
insurance to use a separate data source to verify the costs submitted 
by carriers in their rate filings.[Footnote 41] In another example, 
respondents from Virginia reported that their state had begun 
undertaking detailed analyses of premium trends in the state's 
individual and small-group markets. According to the state 
respondents, these analyses will provide rate reviewers with benchmark 
industry values for various factors, such as underlying costs and 
benefit changes, which will help focus rate reviewers' efforts on the 
drivers of a given rate increase. The respondents reported that these 
analyses will also allow reviewers to more easily identify potentially 
excessive or unreasonable rate increases. 

* Involving consumers in the rate review process. Three survey 
respondents reported taking steps to increase consumer involvement in 
the rate review process.[Footnote 42] For example, respondents from 
Connecticut reported that the state's insurance department has posted 
all rate filings received from carriers on its web site and created an 
online application that allows consumers to comment on the proposed 
rates. In another example, respondents from Oregon reported that the 
state's insurance department has contracted with a consumer advocacy 
organization to provide comments on rate filings on a regular basis. 
Finally, respondents from Nevada reported that the state is taking 
steps to create a rate hearing process that will allow consumer 
advocates to represent the interests of consumers at the hearings. 

Increase capacity to oversee rates. Over two-thirds of the state 
survey respondents that reported making changes to rate oversight 
reported that they have begun to make changes to increase their 
capacity to oversee premium rates.[Footnote 43] These reported changes 
consisted primarily of hiring staff or outside actuaries, and 
improving the information technology systems used to collect and 
analyze rate filing data. 

Twenty survey respondents reported hiring additional staff or 
contracting with external actuaries and consultants to improve 
capacity in various ways, such as to review rates, coordinate the rate 
review process or provide administrative support to review staff, and 
train staff. For example, respondents from Oregon reported hiring 
staff to perform a comprehensive and timely review of the filings, and 
to review rate filings for completeness upon receipt. In another 
example, respondents from West Virginia reported that they used a 
portion of their HHS grant funding to obtain external actuarial 
support for reviewing rate filings. In addition, Illinois officials 
told us that they have taken steps to hire two internal actuaries, as 
well as other analytical staff to help with the processing of rate 
filings to help relieve the workload of current office staff. 

Seventeen respondents reported taking steps to increase their capacity 
to oversee premium rates by improving information technology and data 
systems used in the review process. Nine of these respondents reported 
taking steps to enhance their use of the System for Electronic Rate 
and Form Filing (SERFF)--a web-based electronic system developed by 
NAIC for states to collect electronic rate filings from carriers--such 
as by working with NAIC or by improving their insurance department's 
information technology infrastructure to support the use of SERFF. 
[Footnote 44] Additionally, some respondents also reported taking 
steps to make other improvements, such as creating or improving 
additional databases in order to collect rate filing data and analyze 
trends in rate filings.[Footnote 45] For example, respondents from 
Wisconsin reported that their office contracted with an actuarial firm 
using HHS grant funds in part to develop a database to standardize, 
analyze, and monitor rates in the individual and small-group markets, 
which will enable the office to track historical rate change data and 
monitor rate changes. In another example, respondents from Illinois 
reported that they launched a web-based system in February 2011 for 
carriers to use when reporting rate changes, while continuing to work 
with NAIC on SERFF improvements with the intention of eventually 
merging the state's data system with SERFF. 

Obtain additional legislative authority. More than a third of state 
survey respondents that reported making changes to rate oversight 
reported that their states have taken steps--such as introducing or 
passing legislation--in order to obtain additional legislative 
authority for overseeing health insurance premium rates.[Footnote 46] 
For example, respondents from Montana reported that legislation has 
been introduced that would give the state the authority to require 
carriers to submit rate filings for review. In another example, 
Illinois officials told us that the state has authority to require 
some carriers to submit rate filings, but the state does not have the 
authority to approve these filings before the rates take effect. The 
officials told us that legislation has been introduced to obtain prior 
approval authority. Additionally, respondents from North Carolina 
reported that the department has sought additional prior approval 
authority over small-group health insurance rates in addition to its 
existing prior approval authority over rates in the individual, small-
group, and large-group health insurance markets. Finally, some states 
reported taking steps to review their current authority to determine 
if changes were necessary. 

Agency Comments: 

HHS provided us with written comments on a draft version of this 
report. These comments are reprinted in appendix IV. HHS and NAIC also 
provided technical comments, which we incorporated as appropriate. 

In its written comments, HHS noted that health insurance premiums have 
doubled on average over the last 10 years, putting coverage out of 
reach for many Americans. Further, HHS noted that as recently as the 
end of 2010, fewer than half of the states and territories had the 
legal authority to reject a proposed increase if the increase was 
excessive, lacked justification, or failed to meet other state 
standards. 

In its written comments, HHS also noted the steps it is taking to 
improve transparency, help states improve their health insurance rate 
review, and assure consumers that any premium increases are being 
spent on medical care. Specifically, HHS noted its requirement that, 
starting in September 2011, certain insurers seeking rate increases of 
10 percent or more in the individual and small-group markets publicly 
disclose the proposed increases and their justification for them. 
[Footnote 47] According to HHS, this requirement will help promote 
competition, encourage insurers to work towards controlling health 
care costs, and discourage insurers from charging unjustified 
premiums. In its comments, HHS also discussed the state grant program 
provided for by PPACA to help states improve their health insurance 
rate review. As our report notes, in addition to grants awarded in 
2010, HHS announced in February 2011 that nearly $200 million in 
additional grant funds were available to help states establish an 
effective rate review program. Finally, the comments from HHS point 
out that their rate review regulation will work in conjunction with 
their medical loss ratio regulation released on November 22, 2010, 
which is intended to ensure that premiums are being spent on health 
care and quality-related costs, not administrative costs and executive 
salaries.[Footnote 48] 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
Secretary of Health and Human Services, the Administrator for Medicare 
& Medicaid Services, and other interested parties. In addition, the 
report will be available at no charge on the GAO web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are listed in appendix V. 

Signed by: 

John E. Dicken: 
Director, Health Care: 

[End of section] 

Appendix I Scope and Methodology: 

Our objectives were to describe (1) states' practices for overseeing 
health insurance premium rates in 2010, including the outcomes of 
premium rate reviews, and (2) changes that states that received 
Department of Health and Human Services (HHS) rate review grants have 
begun making to enhance their oversight of health insurance premium 
rates. 

To describe states' practices for overseeing health insurance premium 
rates in 2010, including the outcomes of rate reviews, we analyzed 
data from our web-based survey sent to officials of the insurance 
departments[Footnote 49] of all 50 states and the District of Columbia 
(collectively referred to as "states"). We obtained the names, titles, 
phone numbers, and e-mail addresses of our state insurance department 
survey contacts by calling each insurance department and asking for 
the most appropriate contact. The survey primarily contained questions 
on state practices for overseeing rates during calendar year 2010, 
such as the number of filings received, reviewed, and outcomes of 
review, the timing of state review, factors considered during review, 
independent verification of carrier data, consumer involvement, and 
capacity and resources to review rates. During the development of our 
survey, we pretested it with insurance department officials from three 
states--Michigan, Tennessee, and West Virginia--to ensure that our 
questions and response choices were clear, appropriate, and 
answerable. We made changes to the content of the questionnaire based 
on their feedback. We conducted the survey from February 25, 2011, 
through April 4, 2011. Of the 51 state insurance departments, 50 
completed the survey.[Footnote 50] However, not all states responded 
to each question in the survey. Additionally, some survey respondents 
reported that they did not have data that could be sorted by health 
insurance market. See appendix II for the complete results of the 
survey. 

Because we sent the survey of state insurance departments to the 
complete universe of potential respondents, it was not subject to 
sampling error. However, the practical difficulties of conducting any 
survey may introduce errors, commonly referred to as nonsampling 
errors. For example, difficulties in how a particular question was 
interpreted, in the sources of information that were available to 
respondents, or in how the data were entered into a database or were 
analyzed could introduce unwanted variability into the survey results. 
We encountered instances of nonsampling survey error in analyzing the 
survey responses. Specifically, in some instances, respondents 
provided conflicting, vague, or incomplete information. We generally 
addressed these errors by contacting the state insurance department 
officials involved and clarifying their responses. However, we did not 
independently verify the information and data provided by the state 
survey respondents. 

To obtain more in-depth information on states' practices for 
overseeing rates in calendar year 2010, we interviewed state insurance 
department officials from a judgmental sample of five states: 
California, Illinois, Maine, Michigan, and Texas. To ensure that we 
identified a range of states for our in-depth interviews, we 
considered: 

* state insurance departments' authorities in 2010 for reviewing 
health insurance premium rates, as reported by the National 
Association of Insurance Commissioners (NAIC); 

* states' plans to change their premium rate oversight practices, as 
described in their Cycle I rate review grant applications to HHS 
submitted in June and July of 2010; 

* states' population sizes; and: 

* states' geographic locations. 

These criteria allowed us, in our view, to obtain information from 
insurance departments in a diverse mix of states, but the findings 
from our in-depth interviews cannot be generalized to all states 
because the states selected were part of a judgmental sample. We used 
information obtained during these interviews throughout this report. 

To describe changes that states have begun making to enhance their 
oversight of premium rates, we relied primarily on data collected in 
our state insurance department survey, in which we asked respondents 
to describe through open-ended responses steps taken to implement the 
changes to premium rate oversight that were proposed in states' Cycle 
I rate review grant applications to HHS.[Footnote 51] We then 
performed a content analysis of these open-ended responses through the 
following process: From a preliminary analysis of the survey 
responses, we identified a total of 13 types of state changes such as 
hiring staff or consultants to review rates, involving consumers in 
the rate oversight process, and improving information technology. We 
then grouped those types of changes reported by survey respondents 
into three categories of reported changes. Two GAO analysts 
independently assigned codes to each response, and if respondents 
provided conflicting or vague information, we addressed these errors 
by contacting the state insurance department officials involved and 
clarifying their responses; however, we did not independently verify 
the information provided in the survey responses. To gain further 
information on state changes to rate oversight practices, we also 
asked about changes during our in-depth interviews with insurance 
department officials in five states described above. In addition, we 
interviewed officials from the Center for Consumer Information and 
Insurance Oversight within the Centers for Medicare & Medicaid 
Services, and reviewed portions of the states' Cycle I rate review 
grant applications submitted to HHS and other relevant HHS documents. 

To gather additional information related to both of our research 
objectives, we interviewed a range of experts and organizations 
including NAIC, the American Academy of Actuaries, America's Health 
Insurance Plans, two large carriers based on their number of covered 
lives, NAIC consumer representatives (individuals who represent 
consumer interests at meetings with NAIC), and various advocacy groups 
such as Families USA and Consumers Union. 

We conducted this performance audit from September 2010 through June 
2011 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Additional Results from Our Survey on State Oversight of 
Health Insurance Premium Rates: 

This appendix presents additional results from our survey of insurance 
department officials in all 50 states and the District of Columbia on 
their oversight of health insurance premium rates in 2010, and changes 
they have begun to make to enhance their oversight of health insurance 
premium rates. 

Table 3 presents survey responses by state on the number of rate 
filings that were received, reviewed, and disapproved, withdrawn, or 
resulted in rates lower than originally proposed in the individual, 
small-group, and large-group markets in 2010. 

Table 3: Number of Rate Filings Received, Reviewed, and Disapproved, 
Withdrawn, or Resulting in Rates Lower Than Originally Proposed in 
2010 in the Individual, Small-Group, and Large-Group Markets, by State: 

AL: [Empty]; AL: [Empty]. 

State: Alabama; 
Rate filings received: 
Individual: 30; 
Small: 9; 
Large: 35; 
Total[A]: 117; 
Rate filings reviewed: 
Individual: 30; 
Small: 9; 
Large: 35; 
Total[A]: 117; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 10; 
Small: 2; 
Large: 8; 
Total[A]: 22. 

State: Alaska; 
Rate filings received: 
Individual: 2; 
Small: 2; 
Large: 0; 
Total[A]: 4; 
Rate filings reviewed: 
Individual: 2; 
Small: 2; 
Large: 0; 
Total[A]: 4; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 1; 
Small: 0; 
Large: 0; 
Total[A]: 1. 

State: Arizona[B,C]; 
Rate filings received: 
Individual: 54; 
Small: 0; 
Large: 0; 
Total[A]: 54; 
Rate filings reviewed: 
Individual: 52; 
Small: 0; 
Large: 0; 
Total[A]: 52; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Arkansas; 
Rate filings received: 
Individual: 23; 
Small: 2; 
Large: 9; 
Total[A]: 34; 
Rate filings reviewed: 
Individual: 23; 
Small: 2; 
Large: 9; 
Total[A]: 34; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 4; 
Small: 0; 
Large: 0; 
Total[A]: 4. 

State: California; 
Rate filings received: 
Individual: 248; 
Small: 0; 
Large: 0; 
Total[A]: 248; 
Rate filings reviewed: 
Individual: 225; 
Small: 0; 
Large: 0; 
Total[A]: 225; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 14; 
Small: 0; 
Large: 0; 
Total[A]: 14. 

State: Colorado[D]; 
Rate filings received: 
Individual: 232; 
Small: 54; 
Large: 113; 
Total[A]: 399; 
Rate filings reviewed: 
Individual: 232; 
Small: 54; 
Large: 113; 
Total[A]: 399; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 125; 
Small: 17; 
Large: 48; 
Total[A]: 190. 

State: Connecticut; 
Rate filings received: 
Individual: 33; 
Small: 15; 
Large: 12; 
Total[A]: 60; 
Rate filings reviewed: 
Individual: 33; 
Small: 15; 
Large: 11; 
Total[A]: 59; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 24; 
Small: 8; 
Large: 5; 
Total[A]: 37. 

State: Delaware; 
Rate filings received: 
Individual: 25; 
Small: 27; 
Large: 25; 
Total[A]: 89; 
Rate filings reviewed: 
Individual: 25; 
Small: 27; 
Large: 25; 
Total[A]: 89; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 16; 
Small: 5; 
Large: 0; 
Total[A]: 29. 

State: District of Columbia; 
Rate filings received: 
Individual: 68; 
Small: NA; 
Large: NA; 
Total[A]: 310; 
Rate filings reviewed: 
Individual: 68; 
Small: NA; 
Large: NA; 
Total[A]: 310; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: Florida; 
Rate filings received: 
Individual: 72; 
Small: 147; 
Large: 0; 
Total[A]: 219; 
Rate filings reviewed: 
Individual: 66; 
Small: 141; 
Large: 0; 
Total[A]: 207; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 3; 
Small: 7; 
Large: 0; 
Total[A]: 10. 

State: Georgia; 
Rate filings received: 
Individual: 152; 
Small: 75; 
Large: 129; 
Total[A]: 356; 
Rate filings reviewed: 
Individual: 152; 
Small: 75; 
Large: 129; 
Total[A]: 356; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 8; 
Small: 4; 
Large: 7; 
Total[A]: 19. 

State: Hawaii; 
Rate filings received: 
Individual: 6; 
Small: 6; 
Large: 13; 
Total[A]: 25; 
Rate filings reviewed: 
Individual: 6; 
Small: 6; 
Large: 13; 
Total[A]: 25; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 1; 
Small: 0; 
Large: 0; 
Total[A]: 1. 

State: Idaho; 
Rate filings received: 
Individual: 22; 
Small: 40; 
Large: 2; 
Total[A]: 64; 
Rate filings reviewed: 
Individual: 7; 
Small: 2; 
Large: 0; 
Total[A]: 9; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Illinois[E]; 
Rate filings received: 
Individual: 84; 
Small: 0; 
Large: 0; 
Total[A]: 84; 
Rate filings reviewed: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Indiana[F]; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: Iowa; 
Rate filings received: 
Individual: 51; 
Small: 0; 
Large: 0; 
Total[A]: 51; 
Rate filings reviewed: 
Individual: 51; 
Small: 0; 
Large: 0; 
Total[A]: 51; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 28; 
Small: 0; 
Large: 0; 
Total[A]: 28. 

State: Kansas; 
Rate filings received: 
Individual: 93; 
Small: 62; 
Large: 121; 
Total[A]: 276; 
Rate filings reviewed: 
Individual: 93; 
Small: 62; 
Large: 121; 
Total[A]: 276; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 51; 
Small: 0; 
Large: 0; 
Total[A]: 51. 

State: Kentucky; 
Rate filings received: 
Individual: 69; 
Small: 94; 
Large: 12; 
Total[A]: 175; 
Rate filings reviewed: 
Individual: 57; 
Small: 72; 
Large: 9; 
Total[A]: 138; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 6; 
Small: 0; 
Large: 0; 
Total[A]: 6. 

State: Louisiana[E]; 
Rate filings received: 
Individual: 112; 
Small: 5; 
Large: 13; 
Total[A]: 195; 
Rate filings reviewed: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Maine[B]; 
Rate filings received: 
Individual: 19; 
Small: 32; 
Large: 40; 
Total[A]: 91; 
Rate filings reviewed: 
Individual: 19; 
Small: 32; 
Large: 0; 
Total[A]: 51; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 4; 
Small: 0; 
Large: 0; 
Total[A]: 4. 

State: Maryland; 
Rate filings received: 
Individual: 24; 
Small: 68; 
Large: 53; 
Total[A]: 145; 
Rate filings reviewed: 
Individual: 24; 
Small: 68; 
Large: 53; 
Total[A]: 145; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 8; 
Small: 10; 
Large: 4; 
Total[A]: 22. 

State: Massachusetts[G]; 
Rate filings received: 
Individual: 18; 
Small: 48; 
Large: 28; 
Total[A]: 94; 
Rate filings reviewed: 
Individual: 18; 
Small: 48; 
Large: 0; 
Total[A]: 66; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 19; 
Large: 0; 
Total[A]: 19. 

State: Michigan; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 182; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 182; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 12. 

State: Minnesota; 
Rate filings received: 
Individual: 73; 
Small: 61; 
Large: 35; 
Total[A]: 169; 
Rate filings reviewed: 
Individual: 73; 
Small: 61; 
Large: 35; 
Total[A]: 169; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 17; 
Small: 3; 
Large: 0; 
Total[A]: 20. 

State: Mississippi; 
Rate filings received: 
Individual: 7; 
Small: 3; 
Large: 5; 
Total[A]: 15; 
Rate filings reviewed: 
Individual: 7; 
Small: 3; 
Large: 5; 
Total[A]: 15; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: Missouri; 
Rate filings received: 
Individual: 44; 
Small: 10; 
Large: 2; 
Total[A]: 56; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Montana[H]; 
Rate filings received: 
Individual: 36; 
Small: 17; 
Large: 4; 
Total[A]: 57; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: Nebraska; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 302; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 302; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 0. 

State: Nevada; 
Rate filings received: 
Individual: 51; 
Small: 22; 
Large: 33; 
Total[A]: 106; 
Rate filings reviewed: 
Individual: 51; 
Small: 22; 
Large: 33; 
Total[A]: 106; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 5; 
Small: 0; 
Large: 0; 
Total[A]: 5. 

State: New Hampshire; 
Rate filings received: 
Individual: 22; 
Small: 33; 
Large: 17; 
Total[A]: 72; 
Rate filings reviewed: 
Individual: 22; 
Small: 33; 
Large: 17; 
Total[A]: 72; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 12; 
Small: 11; 
Large: 3; 
Total[A]: 26. 

State: New Jersey; 
Rate filings received: 
Individual: 27; 
Small: 49; 
Large: 14; 
Total[A]: 90; 
Rate filings reviewed: 
Individual: 27; 
Small: 49; 
Large: 14; 
Total[A]: 90; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 4; 
Small: 0; 
Large: 0; 
Total[A]: 4. 

State: New Mexico; 
Rate filings received: 
Individual: 31; 
Small: 28; 
Large: 18; 
Total[A]: 77; 
Rate filings reviewed: 
Individual: 31; 
Small: 28; 
Large: 18; 
Total[A]: 77; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 10; 
Small: 4; 
Large: 5; 
Total[A]: 19. 

State: New York[I]; 
Rate filings received: 
Individual: 27; 
Small: 73; 
Large: 26; 
Total[A]: 126; 
Rate filings reviewed: 
Individual: 7; 
Small: 18; 
Large: 10; 
Total[A]: 35; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 3; 
Small: 15; 
Large: 7; 
Total[A]: 25. 

State: North Carolina; 
Rate filings received: 
Individual: 169; 
Small: 103; 
Large: 292; 
Total[A]: 564; 
Rate filings reviewed: 
Individual: 169; 
Small: 103; 
Large: 178; 
Total[A]: 450; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 5; 
Small: 0; 
Large: 0; 
Total[A]: 5. 

State: North Dakota; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 43; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 24; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 18. 

State: Ohio; 
Rate filings received: 
Individual: 191; 
Small: 109; 
Large: 47; 
Total[A]: 347; 
Rate filings reviewed: 
Individual: 194; 
Small: 109; 
Large: 51; 
Total[A]: 354; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 72; 
Small: 16; 
Large: 13; 
Total[A]: 101. 

State: Oklahoma[J]; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: Oregon; 
Rate filings received: 
Individual: 57; 
Small: 36; 
Large: 0; 
Total[A]: 93; 
Rate filings reviewed: 
Individual: 35; 
Small: 16; 
Large: 0; 
Total[A]: 51; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 13; 
Small: 8; 
Large: 0; 
Total[A]: 21. 

State: Pennsylvania; 
Rate filings received: 
Individual: 84; 
Small: 26; 
Large: 58; 
Total[A]: 168; 
Rate filings reviewed: 
Individual: 84; 
Small: 26; 
Large: 29; 
Total[A]: 139; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 46; 
Small: 4; 
Large: 2; 
Total[A]: 52. 

State: Rhode Island; 
Rate filings received: 
Individual: 6; 
Small: 6; 
Large: 10; 
Total[A]: 37; 
Rate filings reviewed: 
Individual: 6; 
Small: 6; 
Large: 12; 
Total[A]: 39; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: South Carolina; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 417; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 417; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 21. 

State: South Dakota; 
Rate filings received: 
Individual: 34; 
Small: 0; 
Large: 0; 
Total[A]: 34; 
Rate filings reviewed: 
Individual: 34; 
Small: 0; 
Large: 0; 
Total[A]: 34; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 16; 
Small: 0; 
Large: 0; 
Total[A]: 16. 

State: Tennessee; 
Rate filings received: 
Individual: 26; 
Small: 16; 
Large: 27; 
Total[A]: 69; 
Rate filings reviewed: 
Individual: 26; 
Small: 0; 
Large: 0; 
Total[A]: 26; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 5; 
Small: 0; 
Large: 0; 
Total[A]: 5. 

State: Texas; 
Rate filings received: 
Individual: 423; 
Small: 32; 
Large: 52; 
Total[A]: 507; 
Rate filings reviewed: 
Individual: 298; 
Small: 27; 
Large: 52; 
Total[A]: 377; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 15; 
Small: 2; 
Large: 0; 
Total[A]: 17. 

State: Utah[C]; 
Rate filings received: 
Individual: 35; 
Small: 109; 
Large: 0; 
Total[A]: 144; 
Rate filings reviewed: 
Individual: 13; 
Small: 39; 
Large: 0; 
Total[A]: 52; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 10; 
Small: 21; 
Large: 0; 
Total[A]: 31. 

State: Vermont; 
Rate filings received: 
Individual: 21; 
Small: 30; 
Large: 22; 
Total[A]: 73; 
Rate filings reviewed: 
Individual: 21; 
Small: 30; 
Large: 22; 
Total[A]: 73; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 5; 
Small: 13; 
Large: 8; 
Total[A]: 26. 

State: Virginia[B,J]; 
Rate filings received: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: 110; 
Rate filings reviewed: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: NA; 
Small: NA; 
Large: NA; 
Total[A]: NA. 

State: Washington; 
Rate filings received: 
Individual: 23; 
Small: 21; 
Large: 579; 
Total[A]: 623; 
Rate filings reviewed: 
Individual: 23; 
Small: 21; 
Large: 579; 
Total[A]: 623; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 13; 
Small: 3; 
Large: 28; 
Total[A]: 44. 

State: West Virginia[K]; 
Rate filings received: 
Individual: 20; 
Small: 12; 
Large: 2; 
Total[A]: 42; 
Rate filings reviewed: 
Individual: 20; 
Small: 12; 
Large: 2; 
Total[A]: 42; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 2; 
Small: 0; 
Large: 0; 
Total[A]: 4. 

State: Wisconsin; 
Rate filings received: 
Individual: 99; 
Small: 0; 
Large: 0; 
Total[A]: 99; 
Rate filings reviewed: 
Individual: 99; 
Small: 0; 
Large: 0; 
Total[A]: 99; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Wyoming; 
Rate filings received: 
Individual: 3; 
Small: 4; 
Large: 4; 
Total[A]: 11; 
Rate filings reviewed: 
Individual: 1; 
Small: 2; 
Large: 2; 
Total[A]: 5; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 0; 
Small: 0; 
Large: 0; 
Total[A]: 0. 

State: Total; 
Rate filings received: 
Individual: 2,946; 
Small: 1,486; 
Large: 1,852; 
Total[A]: 7,723; 
Rate filings reviewed: 
Individual: 2,424; 
Small: 1,220; 
Large: 1,577; 
Total[A]: 6,466; 
Rate filings disapproved, withdrawn, or resulting in lower rates: 
Individual: 556; 
Small: 172; 
Large: 138; 
Total[A]: 929. 

Source: GAO analysis. 

Notes: NA refers to respondents that either did not provide a 
response, or reported that they did not have data available to answer 
the question. 

In the small-group market, enrollees generally obtain health insurance 
coverage through a group health plan offered by a small employer, and 
in the large-group market, enrollees generally obtain coverage through 
a group health plan offered by a large employer. In the period 
reflected in our survey, states generally defined a small employer as 
an employer with at least 2 but not more than 50 employees, and a 
large employer as an employer with at least 51 employees. 

Officials from some states reported that since rate review takes place 
over time, the rate filings on which action is taken in 2010 may not 
be exactly the same set of rate filings received in 2010. 

[A] Totals do not always equal the sum of the individual, small-group, 
and large-group markets. Some states reported rate filings that could 
not be separated by market. 

[B] Survey respondents reported that some of the rate filing data were 
estimated or may not be accurate because of system limitations. 

[C] Reported numbers do not include limited benefit plans, known also 
as mini-med plans. 

[D] Survey respondent reported that the state's definitions of 
individual and small-group markets differ from federal definitions. 

[E] Survey respondents reported that they did not review any rate 
filings during calendar year 2010. 

[F] Officials from Indiana did not complete the survey. 

[G] Survey respondents reported that their numbers for the small-group 
market represent a merged market consisting of small groups and 
individuals. 

[H] Survey respondents reported that they did not complete any reviews 
of rate filings during 2010 because they first received rate filing 
data from carriers in December 2010 and the data were incomplete. 

[I] Reported numbers represent filings for rate changes only. 

[J] Survey respondents reported data system limitations which 
prevented them from reporting certain rate filing data. 

[K] Data provided represent the time period of August 15, 2010, 
through December 31, 2010, because survey respondents reported that 
they began to collect rate filings on August 15, 2010. 

[End of table] 

Table 4 presents the number of survey respondents that reported that 
the state insurance department required actuarial justification for 
rate filings, and whether the justifications were reviewed by an 
actuary in 2010 in the individual, small-group, and large-group 
markets. 

Table 4: Actuarial Justifications Required and Reviewed in 2010, by 
State: 

State: Alabama[A]; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Alaska; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: None. 

State: Arizona[B]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: None. 

State: Arkansas; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: California; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: NA. 

State: Colorado[C]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: More than half. 

State: Connecticut; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Delaware; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: District of Columbia; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Check]; 
Actuarial justifications reviewed: All. 

State: Florida; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Georgia; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Hawaii; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Idaho; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Illinois[D]; 
Actuarial justifications required: 
Individual market: NA; 
Small-group market: NA; 
Large-group market: NA; 
Justifications required but data not collected by market: NA; 
Actuarial justifications reviewed: NA. 

State: Indiana[E]; 
Actuarial justifications required: 
Individual market: NA; 
Small-group market: NA; 
Large-group market: NA; 
Justifications required but data not collected by market: NA; 
Actuarial justifications reviewed: NA. 

State: Iowa; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Kansas; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Kentucky; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Louisiana[D]; 
Actuarial justifications required: 
Individual market: NA; 
Small-group market: NA; 
Large-group market: NA; 
Justifications required but data not collected by market: NA; 
Actuarial justifications reviewed: NA. 

State: Maine[F]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Maryland; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Massachusetts[G]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: More than half. 

State: Michigan; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Check]; 
Actuarial justifications reviewed: Less than half. 

State: Minnesota; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Mississippi; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Missouri; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: NA. 

State: Montana; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: None. 

State: Nebraska; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Nevada; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: New Hampshire; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: New Jersey; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: New Mexico; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: New York[H]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: North Carolina[I]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: North Dakota; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Ohio[J]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Oklahoma; 
Actuarial justifications required: 
Individual market: [Empty]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Oregon; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Pennsylvania; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Rhode Island; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: South Carolina; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: South Dakota; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Tennessee; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Texas; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: More than half. 

State: Utah; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Vermont; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

State: Virginia; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Washington; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: None. 

State: West Virginia; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: None. 

State: Wisconsin; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Empty]; 
Large-group market: [Empty]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: Less than half. 

State: Wyoming[K]; 
Actuarial justifications required: 
Individual market: [Check]; 
Small-group market: [Check]; 
Large-group market: [Check]; 
Justifications required but data not collected by market: [Empty]; 
Actuarial justifications reviewed: All. 

Source: GAO analysis. 

Note: NA refers to respondents that did not provide a response to the 
question. 

[A] Survey respondents reported that they do not require actuarial 
justifications from carriers, but that they request that carriers 
submit them. The respondents reported that they review all actuarial 
justifications that they receive. 

[B] Survey respondents reported that the state does not have employed 
or contracted actuaries, but requires actuarial justification and 
certification on every filing and tries to ensure that the 
certification is appropriate. 

[C] Survey respondents reported that their definitions of individual 
and small-group markets differ from federal definitions. 

[D] Survey respondents were directed to skip this question because 
they reported that they did not review rate filings in 2010. 

[E] Officials from Indiana did not complete the survey. 

[F] Survey respondents reported that in the small-group market, 
actuarial justification is required in the small-group market for 
carriers that do not meet state-defined covered lives and medical loss 
ratio thresholds. 

[G] Survey respondents reported that their numbers reported for the 
small-group market represent a merged market consisting of small 
groups and individuals. 

[H] Reported numbers represent filings for rate changes only. 

[I] Survey respondents reported that for the individual market, 
actuarial justifications are required for rate revisions for all 
carrier types, while in the small-group and large-group markets, 
actuarial justifications are only required for certain carrier types 
(e.g., HMOs). 

[J] Survey respondents reported that actuarial analysts (i.e., 
analysts who are not credentialed actuaries but are supervised by 
credentialed actuaries) reviewed the actuarial justifications. 

[K] Survey respondents reported that only HMO filings received an 
actuarial review. 

[End of table] 

Table 5 presents survey responses on states' capacity and resources to 
review rate filings in 2010. 

Table 5: Reported Capacity and Resources to Review Rate Filings in 
2010, by State: 

State: Alabama; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Alaska; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Arizona; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Arkansas; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: California; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Colorado; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Connecticut; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Delaware; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: District of Columbia; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Florida; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Georgia; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Hawaii; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Idaho; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Illinois; 
State reported sufficient capacity and resources to review rates in 
2010: No response. 

State: Indiana[A]; 
State reported sufficient capacity and resources to review rates in 
2010: No response. 

State: Iowa; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Kansas; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Kentucky; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Louisiana; 
State reported sufficient capacity and resources to review rates in 
2010: No response. 

State: Maine; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Maryland; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Massachusetts; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Michigan; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Minnesota; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Mississippi; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Missouri; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Montana; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Nebraska; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Nevada; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: New Hampshire; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: New Jersey; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: New Mexico; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: New York; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: North Carolina; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: North Dakota; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Ohio; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Oklahoma; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Oregon; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Pennsylvania; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Rhode Island; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: South Carolina; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: South Dakota; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Tennessee; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Texas; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Utah; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Vermont; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Virginia; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Washington; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: West Virginia; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Wisconsin; 
State reported sufficient capacity and resources to review rates in 
2010: No. 

State: Wyoming; 
State reported sufficient capacity and resources to review rates in 
2010: Yes. 

State: Total; 
State reported sufficient capacity and resources to review rates in 
2010: 
Yes: 33; 
No: 15; 
No response: 3. 

Source: GAO analysis. 

[A] Officials from Indiana did not complete the survey. 

[End of table] 

Table 6 presents information on the types of changes that survey 
respondents that had been awarded HHS Cycle I rate review grants 
reported making to enhance their oversight of health insurance premium 
rates. 

Table 6: Summary of Content Analysis of Reported Changes to State 
Oversight of Health Insurance Premium Rates: 

State survey respondent reported taking steps to make any of the 
following changes: 41 respondents. 

Improve the rate review process: 34 respondents. 

* Develop a process or review the existing process (includes seeking 
recommendations or stakeholder input): 22 respondents. 

* Provide rate information to consumers: 16 respondents. 

* Change the information required from carriers in rate filings: 13 
respondents. 

* Obtain additional data sources, or conduct studies or additional 
data analyses to improve rate review: 11 respondents. 

* Involve consumers in the rate review process: 3 respondents. 

* Other: 5 respondents. 

Increase capacity to oversee rates: 29 respondents. 

* Improve information technology or data systems used in the review 
process: 17 respondents. 

* Hire staff, actuaries, or actuarial consultants to review rates: 16 
respondents. 

* Hire staff to coordinate the state's review process: 4 respondents. 

* Hire staff, actuaries, or consultants to train staff: 3 respondents. 

* Hire administrative support staff for rate review staff: 3 
respondents. 

* Other: 4 respondents. 

Obtain additional legislative authority: 17 respondents. 

* Obtain additional legislative authority to require rate filings or 
to review or approve rates: 11 respondents. 

* Obtain additional legislative authority for changes other than to 
require rate filings or to review or approve rates: 5 respondents. 

* Review existing authority to determine if the state will pursue 
additional legislative authority: 3 respondents. 

* Other: 2 respondents. 

Source: GAO analysis. 

Note: The total number of respondents that reported taking steps to 
improve the rate review process, increase capacity to oversee rates, 
and obtain additional legislative authority exceeds the total number 
of respondents that reported taking steps to make changes (n=41) 
because most survey respondents reported taking steps to make more 
than one type of change. 

[End of table] 

[End of section] 

Appendix III: Carrier Capital Levels: 

State officials monitor carriers' capital levels to help ensure that 
carriers can meet their financial obligations. State officials' 
primary objective when monitoring capital levels has been to ensure 
the adequacy of carriers' capital to make sure that consumers and 
health care providers are not left with unpaid claims. The focus, 
therefore, has been on monitoring capital levels to ensure that they 
exceed minimum requirements.[Footnote 52] Officials from some states 
have noted that they review this information when reviewing rate 
filings. 

NAIC developed a formula and model law for states to use in 
determining and regulating the adequacy of carriers' capital.[Footnote 
53] The risk-based capital (RBC) formula generates the minimum amount 
of capital that a carrier is required to maintain to avoid regulatory 
action by the state. The formula takes into account, among other 
things, the risk of medical expenses exceeding the premiums collected. 
According to NAIC, 37 states had adopted legislation or regulations 
based on NAIC's Risk-Based Capital (RBC) for Health Organizations 
Model Act as of July 2010 in order to monitor carriers' capital. 
[Footnote 54] However, an NAIC official told us that all states must 
follow the RBC model act in order to meet NAIC accreditation standards. 

Under NAIC's model law, the baseline level at which a state may take 
regulatory action against a carrier is the authorized control level. 
If a carrier's total adjusted capital--which includes shareholders' 
funds and adjustments on equity, asset values, and reserves--dips 
below its authorized control level, the state insurance regulator can 
place the carrier under regulatory control.[Footnote 55] The RBC ratio 
is the ratio of the carrier's total adjusted capital to its authorized 
control level; state officials become involved when the ratio drops 
below 200 percent.[Footnote 56] If the RBC ratio is 200 percent or 
more, no action is required. As shown in table 7 below, NAIC data show 
that, from 2005 through 2010, except for carriers with less than $10 
million in assets, carriers' median RBC ratios were generally higher 
for carriers reporting greater assets. 

Table 7: Median Risk-Based Capital Ratios by Asset Size, 2005-2010: 

Carrier asset size: Less than $10 million; 
Median risk-based capital ratio[B]: 
2005: 938%; 
2006: 958%; 
2007: 855%; 
2008: 852%; 
2009: 958%; 
2010: 1165%; 
Number of carriers represented in 2010[A]: 269. 

Carrier asset size: $10 million to $25 million; 
Median risk-based capital ratio[B]: 
2005: 422%; 
2006: 438%; 
2007: 497%; 
2008: 465%; 
2009: 448%; 
2010: 491%; 
Number of carriers represented in 2010[A]: 99. 

Carrier asset size: $25 million to $100 million; 
Median risk-based capital ratio[B]: 
2005: 444%; 
2006: 431%; 
2007: 451%; 
2008: 425%; 
2009: 429%; 
2010: 497%; 
Number of carriers represented in 2010[A]: 217. 

Carrier asset size: $100 million to $250 million; 
Median risk-based capital ratio[B]: 
2005: 512%; 
2006: 542%; 
2007: 500%; 
2008: 472%; 
2009: 446%; 
2010: 496%; 
Number of carriers represented in 2010[A]: 132. 

Carrier asset size: More than $250 million; 
Median risk-based capital ratio[B]: 
2005: 659%; 
2006: 687%; 
2007: 675%; 
2008: 543%; 
2009: 568%; 
2010: 639%; 
Number of carriers represented in 2010[A]: 139. 

Carrier asset size: All carriers; 

2005: 574%; 
2006: 582%; 
2007: 589%; 
2008: 545%; 
2009: 533%; 
2010: 606%; 
Number of carriers represented in 2010[A]: 856. 

Source: NAIC. 

[A] This column indicates the number of carriers included in each 
asset size category in 2010. This includes all carriers that submitted 
an annual health statement to NAIC. 

[B] A carrier's risk-based capital ratio is the ratio of the carrier's 
total adjusted capital (TAC) to its authorized control level risk-
based capital (ACL RBC). ACL RBC is the level at which a state 
insurance regulator has the authority to place a carrier under 
regulatory control. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of Health and Human Services: 

Department Of Health & Human Services: 
Office Of The Secretary: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

July 21, 2011: 

John Dicken: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street N.W. 
Washington, DC 20548: 

Dear Mr. Dicken: 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) draft report entitled, "Private Health Insurance: State 
Oversight of Premium Rates" (GAO 11-701). 

The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

[End of letter] 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office'S (GAO) Draft Report Entitled. 
"Private Health Insurance: State Oversight Of Health Insurance Premium
Rates" (GAO-11-701): 

For too long, insurance companies in many States have increased health 
insurance premiums with little oversight, transparency, or public 
accountability. Health insurance premiums have doubled on average over 
the last ten years, much faster than wages and inflation, putting 
coverage out of reach for millions of Americans. As recently as 
December 2010, fewer than half of States and Territories had the legal 
authority to reject a proposed increase if the increase was excessive, 
lacked justification, or failed to meet other State standards. 
Additionally, many States that had authority lacked the resources 
needed to exercise it meaningfully. This lack of authority and 
resources for States has contributed to unjustified premium increases. 

Starting in September 2011, HHS is requiring that all non-
grandfathered insurers seeking rate increases of 10 percent or more in 
the individual and small group markets publicly disclose the proposed 
increases and their justification for them. Disclosing proposed 
increases, along with the insurer's justification, sheds light on 
industry pricing practices that some experts believe have led to 
unnecessarily high prices. This transparency in the health insurance 
market will help to promote competition, encourage insurers to work 
towards controlling health care costs, and discourage insurers from 
charging unjustified premiums. 

The Affordable Care Act (ACA) also provides $250 million for a grant 
program to States to help them improve their health insurance rate 
review and reporting processes. Forty-three States and the District of 
Columbia are using $44 million in initial grants awarded by HHS in 
August 2010 to help them improve their oversight of proposed health 
insurance rate increases. In February 2011, HHS announced that nearly 
$200 million in additional grant funds are available to help States 
establish an effective rate review program by: 

* Ensuring proposed rate hikes are comprehensively reviewed in an open 
and transparent process and, to the extent allowed by State law, that 
unreasonable rate hikes are not approved; and, 

* Developing an infrastructure to collect, analyze, and report 
critical information about rate review outcomes and trends including, 
to the extent allowed by State law, whether or not proposed rate 
increases have been approved. 

The grant program will continue to make funding available for States 
to continue program improveMents and ensure that unreasonable rate 
increases in all States will be thoroughly reviewed. 

Rate review regulation will also work in conjunction with the medical 
loss ratio regulation released on November 22, 2010 to make the health 
insurance marketplace more transparent and increase the value 
consumers receive for their health care premium dollars. This proposed 
rate review regulation allows consumers to see what increases are 
being proposed and why. The medical loss ratio regulation ensures that 
premiums are being spent on health care and quality-related costs, not 
administrative costs and executive salaries. These two provisions of 
the ACA work together to assure consumers that any increase in their 
premium is reasonable and that their premium dollars are being spent 
on their medical care. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John E. Dicken, (202) 512-7114 or dickenj@gao.gov: 

Acknowledgments: 

In addition to the contact named above, Kristi Peterson, Assistant 
Director; George Bogart; Kelly DeMots; Krister Friday; Linda Galib; 
and Peter Mangano made key contributions to this report. 

[End of section] 

Footnotes: 

[1] The Kaiser Family Foundation, “Survey of People Who Purchase Their 
Own Insurance” (Menlo Park, CA, June 2010). 

[2] The Kaiser Family Foundation and Health Research & Education 
Trust, “Employer Health Benefits 2010 Annual Survey” (Menlo Park, CA, 
September 2010). 

[3] See Law of Mar. 9, 1945, ch. 20, 59 Stat. 33 (codified, as 
amended, at 15 U.S.C. ch. 20) (popularly known as the McCarran-
Ferguson Act). 

[4] Pub. L. 111-148 §§ 1003, 10101(i), 124 Stat. 119, 139, 891 (adding 
and amending § 2794 to the Public Health Service Act (PHSA)). 

[5] Pub. L. 111-148 § 1003, 124 Stat. 139, 140, 891 (adding and 
amending PHSA § 2794 (a)(1) and (c). 

[6] For the purposes of this report, we refer to the entities 
responsible for the oversight of premium rates as insurance 
departments, even though the entity responsible for oversight of 
premium rates in each state was not always called the Department of 
Insurance. For example, in Minnesota, the Department of Commerce is 
responsible for the oversight of health insurance premium rates. 

[7] Officials from the Indiana Department of Insurance declined to 
complete our survey. 

[8] We obtained information on states’ authorities to oversee premium 
rates from the National Association of Insurance Commissioners. We 
obtained information on states’ proposed changes to their rate 
oversight practices from states’ Cycle I rate review grant 
applications that were submitted to HHS between June and July of 2010. 

[9] A carrier is generally an entity-—either an insurer or managed 
health care plan-—that bears the risk for and administers a range of 
health benefit offerings. 

[10] Forty-five of our 50 state survey respondents reported that they 
applied for an HHS Cycle I rate review grant. Survey respondents from 
five states—-Alaska, Georgia, Iowa, Minnesota, and Wyoming—-did not 
apply for an HHS rate review grant and therefore did not indicate in 
our survey if they had taken steps to make changes to rate oversight as
described in rate review grant applications to HHS. One state-—
Indiana—-applied for a Cycle I rate review grant but did not complete 
our survey. 

[11] Medicare is the federal health insurance program for people age 
65 or over, certain disabled individuals under age 65, and individuals 
diagnosed with end-stage renal disease. Medicaid is the federal-state 
program that finances health care for certain low-income individuals 
and families. 

[12] Carmen DeNevas-Walt, Bernadette D. Proctor, and Jessica C. Smith, 
“Income, Poverty, and Health Insurance Coverage in the United States: 
2009,” U.S. Census Bureau (September 2010). 

[13] States generally define a small employer as an employer with at 
least 2 but not more than 50 employees, and a large employer as an 
employer with at least 51 employees. PPACA redefined a small employer 
as an employer with an average of 1 to 100 employees, and a large 
employer as an employer with an average of at least 101 employees. For 
plan years beginning before January 1, 2016, a state has the option to
define small employers as having employed an average of 1 to 50 
employees during the preceding calendar year and to define large 
employers as having employed an average of at least 51 employees 
during the preceding calendar year. See Pub. L. No. 111-148, § 
1304(b), 124 Stat. 172. 

[14] According to NAIC, in some states, authority to approve or 
disapprove rate filings may also vary by type of insurance product. 

[15] Mark Newsom and Bernadette Fernandez, “Private Health Insurance 
Premiums and Rate Reviews,” Congressional Research Service 
(Washington, D.C., Jan. 11, 2011). 

[16] 75 Fed. Reg. 81004 (Dec. 23, 2010). 

[17] Rate Increase Disclosure and Review; Final Rule, 76 Fed. Reg. 
29964 (May 23, 2011) (codified at 45 C.F.R. subtitle A, subchapter B, 
part 154). The rule is effective July 18, 2011. The rule would require 
the review of all proposed rate increases over an applicable threshold 
to determine whether the rate increases and their underlying 
assumptions were reasonable. 45 C.F.R. §154.200. All proposed rate 
increases over the threshold would be reviewed either by a state—-if 
it is determined by HHS to have an effective rate review program and 
provides its final determination of whether a rate increase is 
unreasonable within 5 business days following the state’s final 
determination—or by HHS. 45 C.F.R. § 154.210. 

[18] According to the final rule, HHS would determine if a state has 
an effective rate review process based on the following criteria: (1) 
whether the state receives from carriers data and documentation 
sufficient to determine whether a rate increase is unreasonable; (2) 
whether the state conducts an effective and timely review of the data 
and documentation submitted by carriers in support of a proposed rate 
increase; (3) whether the state review examines the reasonableness of 
the assumptions used by the carrier in developing its rate proposal 
and the historic data underlying those assumptions and data related to 
past projections and actual experience; (4) whether the state review 
takes into consideration certain specified factors; (5) whether the 
state applies a standard set forth in state statute or regulation when 
making the determination of whether a rate increase is unreasonable; 
and (6) whether the state provides access from its web site to 
information regarding proposed premium rate increases, and has a 
mechanism for receiving public comments on those proposed rate 
increases. 45 C.F.R. § 154.301. 

[19] 45 C.F.R. § 154.205. 

[20] Survey respondents from Florida reported that the state rescinded 
its acceptance of the HHS rate review grant. 

[21] "Grants to Support States in Health Insurance Rate Review-Cycle 
II," accessed July 22, 2011, [hyperlink, 
https://www.grantsolutions.gov/gs/preaward/previewPublicAnnouncement.do?
id=12332]. 

[22] Survey respondents from two states-—Illinois and Louisiana—-
reported that they did not review rate filings in 2010 because their 
state insurance departments did not have sufficient authority to 
approve or disapprove rate filings. 

[23] Survey respondents from 44 states provided data on the number of 
rate filings reviewed in 2010. Respondents from four states-—Missouri, 
Montana, Oklahoma, and Virginia—-reported reviewing rate filings in 
2010 but did not provide the number of rate filings reviewed in 2010. 

[24] Survey respondents from 39 states provided information by market. 

[25] Respondents from 2 of the 48 states that reported reviewing rates 
in 2010 did not respond to this question. 

[26] States review carrier capital levels compared with minimum 
required levels in order to ensure that the carriers can meet their 
financial obligations. In addition, some states may review carrier 
capital levels compared with an upper threshold because concerns have
been raised about carriers maintaining potentially excessive amounts 
of surplus. 

[27] The list of information that survey respondents were provided 
included: medical trend, rate history (for rate changes only), reasons 
for rate revision (for rate changes only), benefits provided, medical 
loss ratio, utilization of services, carrier administrative costs,
enrollee risk profiles/rating characteristics, cost sharing, carrier 
profit, carrier reserves (i.e., liabilities), carrier capital levels 
compared with states’ minimum requirements, and carrier capital levels 
compared with an upper threshold. We created these categories based on 
a review of the possible types of information that state officials 
might consider when reviewing rate filings, including information from 
NAIC and HHS. However, some states may have also reviewed information 
that was not included in our list. 

[28] A medical loss ratio has traditionally been reported as the 
percentage of premium dollars that a carrier spends on medical care, 
versus how much is spent on other functions, such as administrative 
costs and profits. 

[29] Out of the 48 survey respondents that reported reviewing rates in 
2010, 28 reported independently verifying at least some of this 
information, while 20 reported that they did not independently verify 
any information submitted by carriers. 

[30] We did not define “independent verification” for state survey 
respondents, so there may be some variation in what was considered as 
independent verification. 

[31] Survey respondents from Rhode Island reported that substantial 
verification was required for rate filings that the department viewed 
as important, while relatively minor verification took place for 
filings that were considered “peripheral.” 

[32] Survey respondents from 47 states answered our question about 
providing opportunities for consumers to be involved in the oversight 
of health insurance premium rates in 2010. 

[33] Respondents from Connecticut, Iowa, Michigan, and New Mexico 
reported that they only held rate hearings for rates filed in the 
individual market in 2010. 

[34] Respondents from six states-—Arizona, Idaho, Missouri, Nebraska, 
Wisconsin, and Wyoming-—reported that they did not have any rate 
filings that were disapproved, withdrawn, or resulted in lower rates 
than originally proposed in 2010. Respondents from six states-—the 
District of Columbia, Mississippi, Montana, Oklahoma, Rhode Island, and
Virginia—-did not respond to the question, or did not have the 
information available to answer the question. 

[35] States’ determinations to disapprove rates may vary. Regulators 
in one state might disapprove a rate filing for not containing 
complete information, while regulators in another state might remind 
the carrier to submit the required information without automatically
disapproving the rate. An official from Michigan told us that the 
office usually notified carriers ahead of time if it intended to 
disapprove a rate filing or approve a rate filing with modifications 
because carriers usually preferred to withdraw filings and resubmit 
them, rather than have the office disapprove rate filings or approve 
them with modifications. 

[36] The California Code of Regulations defines the lifetime 
anticipated loss ratio as the ratio of (1) the sum of the accumulated 
value of past incurred claims since the inception of the policy and 
the present value of future anticipated claims, to (2) the sum of the
accumulated value of past earned premiums and the present value of 
future anticipated premiums earnings. 

[37] While 41 of the 45 state survey respondents that were awarded HHS 
rate review grants reported taking steps to make changes to their 
oversight of health insurance premium rates, 4 respondents-—from 
Florida, Kansas, New Hampshire, and North Dakota—-reported that they 
had not, for various reasons. For example, respondents from North
Dakota reported that they had not taken steps to make changes due in 
part to limited staff resources. In another example, respondents from 
Florida reported that the state rescinded its acceptance of the HHS 
rate review grant. HHS awarded a total of 46 Cycle I rate review 
grants, but 1 state grantee-—Indiana—-did not respond to our survey. 

[38] While five state survey respondents-—from Alaska, Georgia, Iowa, 
Minnesota, and Wyoming—-reported that their states did not apply for 
an HHS rate review grant, some of these states may also be making 
changes to their oversight of health insurance premium rates. For 
example, survey respondents from Alaska reported that legislation has 
been proposed to expand rate review authority to all carriers in the 
state. Additionally, respondents from Georgia reported that the 
insurance department created a health insurance advisory committee in 
2011 and that the committee’s meetings are open to the public. 

[39] Of the 41 survey respondents who reported making changes to their 
oversight of premium rates, 34 reported that they had taken steps to 
improve the processes used for reviewing premium rates. 

[40] In their HHS Cycle I rate review grant application, officials 
from the Louisiana Department of Insurance reported that the state 
reviewed premium rate filings for long-term care and Medicare 
supplemental health insurance products, but did not review any other 
health insurance premium rate filings. 

[41] Similarly, although the respondents from Texas did not provide 
this information in their survey response, officials from Texas told 
us separately that they have taken steps to purchase a database in 
order to compare information submitted in rate filings to health care 
claims costs, which state officials would estimate using the new 
database. These officials told us that they had not had the funds 
previously to purchase this database. 

[42] Additionally, 16 respondents reported taking steps to provide 
consumers with information about premium rates. Nine of these 16 
reported doing so by posting rate filing information online, such as 
by posting rate filings to the state insurance department’s web
site or, in one example, by creating a web-based tool to notify 
consumers when their insurance company files for a rate increase. 

[43] Of the 41 survey respondents who reported making changes to their 
oversight of premium rates, 29 respondents reported that they have 
begun to make changes to increase their capacity to oversee premium 
rates. 

[44] NAIC officials told us that SERFF is designed to improve the 
efficiency of the rate and form filing and approval process, reducing 
the time and cost involved in making regulatory filings by enabling 
companies to send and states to receive, comment on, and approve or
disapprove rate filings. 

[45] In addition, an NAIC official told us that all states that were 
awarded HHS rate review grants agreed to use $18,808 from their grants 
to support SERFF. 

[46] Of the 41 survey respondents who reported making changes to their 
oversight of premium rates, 17 reported that their states have taken 
steps in order to obtain additional legislative authority for 
overseeing health insurance premium rates. While most of these 17 
survey respondents reported seeking additional authority to review or 
approve rate filings, some respondents reported that their state 
sought authority for other reasons related to rate review, such as 
increasing transparency of the rate review process for consumers and 
strengthening data requirements of carriers when submitting rate 
filings. 

[47] See 76 Fed. Reg. 29985-86 (codified at 45 C.F.R. §§ 154.200, 
154.215). 

[48] See 75 Fed. Reg. 74864, 74921 (Dec. 1, 2010) (to be codified at 
45 C.F.R. pt. 158); 75 Fed. Reg. 82277, 82278 (Dec. 30, 2010) (to be 
codified at 45 C.F.R. pt. 158) (providing corrections for technical 
and typographical errors in the Dec. 1, 2010 interim final rule). 

[49] For the purposes of this report, we refer to the entities 
responsible for the oversight of premium rates as insurance 
departments, even though the entity responsible for oversight of 
premium rates in each state was not always called the Department of 
Insurance. For example, in Minnesota, the Department of Commerce is 
responsible for the oversight of health insurance premium rates. 

[50] The Indiana Department of Insurance declined to complete our 
survey. 

[51] Forty-five of our 50 state survey respondents reported that they 
applied for an HHS Cycle I rate review grant. Survey respondents from 
five states--Alaska, Georgia, Iowa, Minnesota, and Wyoming--did not 
apply for an HHS rate review grant and therefore did not indicate in 
our survey if they had taken steps to make changes to rate oversight 
as described in rate review grant applications to HHS. 

[52] NAIC officials told us that state officials monitor carrier 
capital levels for solvency concerns through off-site analysis and on-
site examination, including tracking capital levels to help ensure 
that carriers can meet their financial obligations. 

[53] NAIC is an organization comprised of insurance regulators from 
all 50 states and the District of Columbia, as well as five U.S. 
territories. As part of its work, NAIC develops model laws to promote 
uniformity among state regulators. For NAIC's model law pertaining to 
carriers' capital, see NAIC Model Laws, Regulations and Guidelines, 
Volume III, 315-1: Risk-Based Capital (RBC) for Health Organizations 
Model Act. Current through Release No. 92, July 2010. 

[54] NAIC defined a health organization as "a health maintenance 
organization, limited health service organization, dental or vision 
plan, hospital, medical and dental indemnity or service corporation or 
other managed care organization licensed under state statute." NAIC's 
definition does not include an organization that is licensed as either 
a life and health insurer or a property and casualty insurer under 
state statute and that is otherwise subject to either the life or 
property and casualty RBC requirements. 

[55] According to NAIC, a state insurance regulator will have the 
authority to place a carrier under regulatory control in this 
situation if the state has passed legislation based on NAIC's model 
law. 

[56] Under NAIC's model law, different levels of action are triggered 
based on a carrier's RBC ratio. An RBC ratio of 150 to 200 percent 
triggers a company action level and the carrier must outline a 
financial plan that identifies the conditions that contributed to the 
company's financial condition. An RBC ratio of 100 to 150 percent 
triggers a regulatory action level. At this level, a carrier is 
required to file an action plan, and the state insurance commissioner 
is required to perform examinations or analyses of the carrier's 
business and operations. An RBC ratio of 70 to 100 percent triggers an 
authorized control level, which means that the state regulator is 
authorized to take control of the carrier. An RBC ratio of less than 
70 percent triggers a mandatory control level, which requires the 
state regulator to take control of the carrier. NAIC officials told us 
that state officials track many different aspects of carriers' 
financial performance to identify any concerning trends or results. 
They told us that this allows the officials to work with carriers to 
hopefully remedy any concerns before the carrier reaches a capital 
level that would trigger an RBC action level. 

[End of section] 

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