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2012 Rate Review Forum

State of New JerseyDepartment of Banking and Insurance

PO Box 32511th Floor

Life & Health ActuarialTrenton, NJ 08625-0325

Tel (609) 292-7272Fax (609) 633-0527

 

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Presentation of the Department’s current rate review procedures, including a description of information provided by carriers and the DOBI actuarial review process.

Overview of New Jersey’s Rate Review Process

R. Neil Vance, Managing Actuary NJ Department of Banking & Insurance

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The Department anticipates that a better understanding of the current Rate Review process will help consumers use it more effectively.

1. The NJ law pertaining to rates;2. The rate review process; and 3. The goal of the process.

Other topics:4. The Federal law pertaining to rates; and5. Resources, information and assistance for

consumers.

Overview

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The RIO mission is to:

• Respond to phone and email inquiries about rates for various forms of health coverage, including comparison of rates;

• Monitor public input on rates and rate filings; • Respond to rate complaints;• Develop informational material like reports; and• Support the actuarial unit that reviews rates.

Rate Information & Oversight (RIO)

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R. Neil Vance, Managing Actuary(609) 292-5427 x 50338

Neil.Vance@dobi.state.nj.us

Gary Weiss, Actuary609-292-7272 x 50562

Gary.Weiss@dobi.state.nj.us

Joanne Petto, Facilitator(609) 292-7272 x 50311

Joanne.Petto@dobi.state.nj.us 

Peg Martino, Analyst(609) 292-7272 x 50311

Peg.Martino@dobi.state.nj.us

Margie Laster, Administrative Support 609-292-7272 x 50132

Margie.Laster@dobi.state.nj.us

Rate Information & Oversight (RIO)

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1. Rates should be sufficient to pay for expected claims, claims-related expenses and administrative expenses; 

2. Rates can’t be excessive – why? It’s unfair to consumers and they won’t purchase; 

3. Rates are based upon variables that reflect the difference in cost by age, plan type, etc.

Economics of Insurance Rates

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1. Protection – Minimum Loss Ratios, Specified Rating Variables and Rate Bands (3.5 to 1);

2. Oversight – Rate Filing, Rate Review and Complaints;

3. Response - Loss Ratio Refunds

How Rate Regulation Works

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Rates are filed and the filing is complete (yawn):

a) Calculation Test – Can we reproduce the rate charged?

b) Analysis Test – Is there enough information to judge the projections? 

c) Are the prospective Minimum Loss Ratio requirements met?

d) Are the projected claims expenses reasonable using Base Experience and Medical Trend?

e) Are only allowed Rate Variables used?f) Are the Rate Bands observed?g) Are the Rate Differentials reasonable?

What are the outcomes of an effective rate review process? Part I

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Can the Department do anything about rates that do not satisfy the criteria just described?

YES!

The Department can disapprove rates that: • Are incomplete;• Are not in compliance with the law;• Are inadequate; or• Are unfairly discriminatory.

What are the outcomes of an effective rate review process?

Part II

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If Minimum Loss Ratio requirements are not met (after the fact), then refunds are issued to the consumers. 

We don’t cheer about refunds because …1. They are a sign that the original rates were too

high;2. They come after the damage is done; 3. They are one size fits all; the process doesn’t

distinguish between classes that overpaid or underpaid.

The Role of Loss Ratio Refunds

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Rate Review cannot lower costs by reducing use of care or by reducing what is paid to providers.

Rate Review process may discover problems in use or cost of medical care. But rate review is not a process for addressing those problems, either with the carrier or with the provider.

The Rate Review process may create data and knowledge that can address this more fundamental problem.

What a Rate Review Can’t Do - Part I

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Limit the percentage increase to 10% or 30%.

Exceptions: a. Legal caps (Temporary 15% under S1557);b. Higher increases get closer scrutiny (yawn); c. Question very low increases (or decreases) if they could

lead to a higher increase later.

Make rates affordable in relation to income. 

Have rates that do not increase with age. a. Rate Bandsb. Rate Differentials by age are reviewed for reasonableness

What a Rate Review Can’t Do - Part II

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Access to rate filings via the Department’s web site and the federal web site;

Public Comment regarding rate filings may be sent via email to: RateReviewComments@DOBI.State.NJ.US

Explanation of Outcome

TRANSPARENCY ISSUES

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1. The Rate Review process CANNOT fix the health care system;

2. The Rate Review process CAN assure that rates are “fair”;

3. John Jacobi – The Federal requirements of the Rate Review process; and

4. Joanne Petto – Consumer Resources.

Conclusion

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Questions?

Health Insurance Education:

Rate Review Process and Consumer Resources

www.state.nj.us/dobi/lifehealthactuarial/rateinfo/index.html