The New York State Department of Financial Services has launched a wide-ranging probe of the accuracy of the data used by insurers and health maintenance organizations (HMOs) to request health insurance rate increases.
“At a time when spiraling health insurance costs are an incredible burden for working people, it is essential that we ensure that rate requests are based on fair, accurate information that has not been manipulated,” said Benjamin Lawsky, superintendent of Financial Services.
“These in-depth audits will allow us to drill down underneath the numbers to make sure they are accurate. For example, we can look at whether insurers are accurately allocating administrative costs and broker commissions. The audits also will help ensure that insurers have proper controls and oversight in place to make certain that data are reliable and accurate. The audits may also help us identify areas where we can take measures to help control costs.”
The audits will be funded under a $4.4 million grant won by the department in September from the U.S. Department of Health and Human Services. The grant was among those issued to a number of states to enhance premium rate review, improve public access and lend more transparency to the processes used to establish health insurance premiums.
The department will conduct on-site audits of health insurers and HMOs selling health insurance plans regulated by the state. These include health plans sold to small businesses and directly to individuals.
The audits will review selected rate requests that have already been filed. Insurers will not know beforehand whether their proposals will be the subject of an audit. Data regarding claims, insurer administrative expenses, premiums and claims reserves will be examined. The department will hire a private accounting firm to assist DFS personnel in conducting the audits.
Under a recently passed law, health insurers must submit their proposals to increase their premiums to the department for “prior approval.” The department can approve, reduce or reject those requests. The department has only 60 days for those reviews and must respond to many complicated requests from many insurers during the same short time period.
Before prior approval, health insurance premium increases were averaging about 14 percent a year. For contracts which started on or after Jan. 1, health insurers requested weighted average increases of 12.7 percent, but the department granted increases of only 8.2 percent. The lower increase will save consumers more than $400 million in 2012.
Source: The New York State Department of Financial Services
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