The Roundhouse in Santa Fe (Photo by Peter St. Cyr)
This week, Governor Martinez has an opportunity to strengthen the state’s ability to protect consumers from unjustified rising health insurance premiums. Friday is the deadline for the governor to sign Senate Bill 208 – health insurance rate review.
Passed with strong bi-partisan support by the state Legislature, the bill would create a more fair and transparent process for evaluating health insurance rates, which thousands of New Mexico consumers and small businesses struggle to afford.
Just last year, many New Mexicans saw their health insurance premiums jump by more than 20 percent. Health insurance premiums have spiraled higher and higher, far above wages increases, inflation and medical costs.
Unfortunately, current law does not protect New Mexico consumers from excessive health insurance rate increases. The New Mexico superintendent of insurance has extremely limited authority to approve or disapprove rates. And existing authority does not give the insurance division of the Public Regulation Commission the information and tools needed to ensure that health insurance rate increases are justified.
Improving the review process
Consumers Union, the nonprofit publisher of Consumer Reports, and Health Action New Mexico are committed to advancing an improved insurance rate review process for New Mexico consumers and businesses. That’s why we’re urging Governor Martinez to approve SB 208. We know that a more rigorous review of health insurance rate hikes can result in significant savings for policyholders.
SB 208 would improve New Mexico’s rate review process in a number of important ways:
- Stronger standard for reviewing rate hikes: Under the new standard, rates for all health plans must be actuarially sound, reasonable, and not excessive, inadequate or unfairly discriminatory. A majority of other states already use the standard that rates may not be excessive.
- More fair criteria for evaluating whether rates are reasonable: The superintendent of insurance would be able to consider the company’s overall financial picture in New Mexico, its compliance with the state’s new loss ratio standards, changes to benefits or plan design, and potential changes in the number of enrollees if the rates are approved.
- Better transparency for consumers and businesses: The bill requires the insurance division to post a plain language explanation of the reasons for a rate increase on its website, including how much of the premium has been spent on actual medical care for the prior three years, and important company financial information, such as surplus and reserves.
- New avenues for consumers to participate in the rate review process: The bill requires a 30-day public comment period on a proposed increase and a right to appeal a decision on rates and have the merits of the increase tested in a hearing.
- Time limits on the review and appeal process: Insurance companies will be ensured a timely decision.
- New protections for consumers insured in individual market “closed blocks:” Consumers insured by policies that are no longer sold to others are especially hard hit with high increases unless rate review allows broader risk spreading, as this bill would.
‘More management statewide health insurance costs’
These changes will shed new light on health insurers’ rating practices and help consumers understand where their premium dollars are going. By making rate justifications public, health insurers will be held more accountable for how they spend premium revenue on medical care and administrative overhead. And consumers and small businesses can make more informed choices when they have access to this type of information.
As the deadline for acting on SB 208 approaches, the Rio Grande Foundation has taken out ads on the radio urging the governor to veto the bill. Their ad is designed to scare and confuse listeners and warns without any explanation that the bill will result in higher costs.
But that’s not what the Legislative Finance Committee concluded when it evaluated the bill. It found that SB 208 would bring about “more manageable statewide health insurance costs.”
Insurance companies should have nothing to hide when it comes to meeting their customers’ needs for affordable health care. By improving transparency, insurance company accountability, and consumers’ understanding of premiums, SB 208 will help New Mexico better address rising healthcare costs.
Sondra Roberto is a staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports. Barbara Webber is the executive director of Health Action New Mexico.