Report: States Working to Protect Consumers from PPACA Premium Increases

Some states have employed various strategies to shield health insurance consumers from the effects of "rate shock" and adverse selection.

Some states have employed various strategies to shield health insurance consumers from the effects of "rate shock" and adverse selection under the Patient Protection and Affordable Care Act, according to a report from the Robert Wood Johnson Foundation and the Urban Institute.

The Patient Protection and Affordable Care Act insurance market reforms have led insurers, regulators and policymakers to raise concerns about short-term rate shock, or premium increases because of enhanced consumer protections and more equal risk sharing in the reformed markets, according to the report. Some have also expressed worry about adverse selection, or particular insurance plans or markets attracting enrollees with higher than average health risks.

The PPACA includes provisions to mitigate the effects of rate shock and adverse selection, including the individual mandate requiring everyone — even the young and healthy — to enroll in health plans or face a fine. On top of that, however, a number of states are enacting their own protective strategies. The report examined policy decisions in 11 states to illustrate the range of policies.

Here are some strategies states are using to protect consumers.

1. Early renewal regulation. This tactic prevents or constrains insurer attempts to renew plans earlier than usual, an act that would delay their need to comply with PPACA market rules. New York, Illinois, Oregon and Rhode Island have used this strategy.

2. Requirements to offer plans at specified metal levels. Under the Patient Protection and Affordable Care Act, health insurers must offer plans within health insurance exchanges that meet distinct levels of coverage in the "metal tiers": bronze, silver, gold and platinum. Maryland, New York and Oregon have sought to stop insurers from avoiding sicker, higher risk individuals by requiring the companies to offer plans at a range of coverage levels.

3. Transition policies for high-risk pools. Before the PPACA became law, 35 states had established high-risk pools as a coverage option for people with pre-existing conditions. Because the healthcare reform law stops insurers from rejecting those with pre-existing conditions, those high-risk pools will no longer be necessary in 2014 and beyond.

However, some analysts have warned the sudden surge of high-cost individuals into the general insurance market could drive up health insurance rates, according to the report. Therefore, some states have considered enacting policies to gradually transition people from the high-risk pools to the exchange markets. For instance, Maryland is contemplating not shutting down its high-risk pool until 2020.

For a full list of strategies, read the full report here.

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