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Review of Premium Rates

The Department of Managed Health Care (DMHC) is committed to providing the public with information in order to expand consumer understanding about premium rate increases and promote more accountability within the health care industry.

Rate Review Process

Health plans are required to file rate information with the DMHC to justify proposed premium rates in the individual and small group markets.

  • Health Plan Rate Filing
    State law requires health plans to file with the DMHC proposed rate changes to individual and small group health plans at least 60 days prior to a rate change going into effect.
  • Notice to Policyholders
    Health plans must give policyholders at least 60 days advance notice of premium rate changes.
  • Public Posting and Opportunity to Comment
    The DMHC posts the health plan’s proposed rate change to its website. Consumers and interested parties may review the filing and submit comments to the DMHC regarding the proposed rate changes. The DMHC posts comments to its website for public viewing.

    View health plan rate filings and submit public comments.
  • Actuarial Review
    Health actuaries review the health plan’s underlying medical costs and trends, as well as other factors, to determine whether the health plan’s proposed rates are justified. During the actuarial review, DMHC actuaries and staff also review the public comments posted to the DMHC website.
  • Additional Information
    If the data submitted by the health plan does not support the proposed rate change, the DMHC may request additional information or request that the health plan modify the proposed rate.
  • Final Determination
    If the DMHC has found the rate filing unreasonable or unjustified, and the health plan has not agreed to a rate reduction, the DMHC will declare the rate unreasonable or unjustified, as appropriate. If the health plan agrees to a reduction in the proposed rate, the health plan must notify policyholders of the new rate. If the new rate has already taken effect, the DMHC may require the health plan to send a refund to affected policyholders or issue a credit toward future premiums.

    Note: The DMHC does not have the authority to deny or approve rate changes.

Rate Review Terms

Questions and Answers

What is the Affordable Care Act?

The Affordable Care Act (ACA) is a comprehensive federal health care reform law enacted in March 2010. The law was enacted in two parts: The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act. The name Affordable Care Act is used to refer to the combined version of the law.

What is a rate?

A rate is the base price for a specific health plan product. The base price, in conjunction with certain rating factors, is used to determine the premium paid by each health plan policyholder.

What is a premium?

A premium is the monthly amount paid by a policyholder (either an individual or employer group) for health coverage. A policyholder’s premium is determined by the base rate as well as age, geographic area and family size.

What is premium rate review?

The process by which the Department of Managed Health Care (DMHC) reviews proposed health plan premium rates for health care coverage sold to individuals and small groups. Health plans file specific information about proposed premium rates with the DMHC. DMHC actuaries analyze the proposed rates and determine if the rates are unjustified or unreasonable. The DMHC does not have the authority to deny or approve rate changes.

What is the purpose of the DMHC Rate Review program?

Rate review promotes accountability within the health care industry and help consumers better understand how health plan rates are developed.

For more information about the DMHC Rate Review program, visit: http://www.healthhelp.ca.gov/LicensingandReporting/FinancialFiling,ExaminationsandReporting/PremiumRateReview.aspx

What types of health plans are subject to the premium rate review process?

Health plans that offer individual and small group coverage must file proposed rate increases with the DMHC. At this time, health plans are not required to file proposed premium rates for large group products with the DMHC.

How does the health plan spend my premium dollars?

Health plans use your premium dollars to:

  • Pay the plan’s medical claims.
  • Fund efforts to improve quality of care.
  • Cover the plan’s administrative costs.
  • Generate profit, if any.

 

What is Medical Loss Ratio?

Medical Loss Ratio (MLR) is the percentage of health plan premiums that a health plan spends on medical services and activities that improve the quality of care. The ACA requires health plans offering coverage in the small group or individual markets to spend at least 80% of premiums for these purposes; health plans offering coverage in the large group market must spend at least 85%.

What factors do actuaries consider when reviewing a rate filing?

Some of the factors the DMHC actuaries consider in determining whether a rate increase is unreasonable include:

  • The health plan’s data regarding past health care cost projections and actual experience.
  • The choice and validity of assumptions used by the health plan in developing the rate proposal.
  • Rating factors used.
  • Completeness and adequacy of the documentation supporting the rate increase.
  • Relationship of the projected medical loss ratio to the federal medical loss ratio standard in the market segment (individual or small group) to which the rate applies.

 

For more information about what factors actuaries consider, visit: http://www.healthhelp.ca.gov/Portals/0/HealthCareLawsRights/PremiumRateReview/dl8k.pdf

How long does it take to review a rate filing?

In general, the DMHC rate review process takes up to 60 days for a typical rate filing. However, very complex rate filings, or those with missing or inadequate information, may take longer to complete.

How often do health plans submit a rate change?

Typically, health plans submit rate changes quarterly or every six months for the small group market, and annually for the individual market. Rates, once reviewed, are in effect for twelve months.

Why does my health plan premium keep going up?

Health care costs for hospitals, doctors, prescription drugs and other health care services are increasing. This is due partly to inflation - how much more services cost one year versus the next. Costs also go up when individuals use more health care services than expected or when they require expensive care. Finally, factors such as an aging population, chronic health conditions (such as diabetes and heart disease) and changes in how providers deliver care also affect the rising cost of healthcare.

What can I do to help lower costs?

  • Participate in wellness programs offered by the health plan.
  • Manage your health actively by leading a healthy lifestyle.
  • Eat smart.
  • Exercise regularly.
  • Get routine check-ups.
  • Avoid using the emergency room by having a regular doctor.
  • Follow your doctor’s advice regarding medications and treatment plans.
  • Read your health plan documents to ensure you understand how to best use your plan.

For more information about comparing health plans, visit: http://www.healthhelp.ca.gov/HealthPlansCoverage/ViewCompareHealthPlans.aspx

For more information about health care costs, visit: http://www.dmhc.ca.gov/HealthPlansCoverage/UnderstandingHealthPlanCosts.aspx

What can I do if I feel my health plan premium increase is not fair?

Contact the DMHC Help Center by phone at 1-888-466-2219 or visit: HealthHelp.ca.gov.


Rate Review Resources