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States Concerned About “Rate Shock” as ACA Approaches

State insurance commissioners are concerned about the possibility that many consumers will experience “rate shock” when major provisions of the Affordable Care Act (ACA) go into effect in January 2014...
April 10, 2013

State insurance commissioners are concerned about the possibility that many consumers will experience “rate shock” when major provisions of the Affordable Care Act (ACA) go into effect in January 2014. That has prompted the NAIC to issue a paper that analyzes the steps that states can take to “mitigate expected premium increases.” The paper, “Rate Increase Mitigation Strategies,” was circulated among state officials as they arrived in Houston on April 4 for their spring meeting.

Major provisions of the federal law take effect in January, when most Americans will be required to have coverage. Insurers must accept all applicants, cannot turn people away because of pre-existing conditions and must provide “essential health benefits” worth more than much of the coverage now bought voluntarily by individuals and small businesses. Also starting next year, the federal law will limit insurers’ ability to charge higher premiums based on age, leading some to fear that younger people in the individual market will see big premium increases.

“In order to minimize the impact of rate increases,” the paper says, “states may consider establishing annual maximum average rate increases on an aggregate, marketwide basis and essentially force insurers to either operate at a short-term loss or find alternative ways to reduce costs.” Kansas Insurance Commissioner Sandy Praeger, former NAIC chairman, said the NAIC is not telling states what to do.

Paper Offers Options on Limiting Higher Health Rates (New York Times 4/4/13)

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