Affordability and Controlling Costs

In 2014, legislation governing how premium rates vary will take effect. These reforms aim to stabilize healthcare costs for employers and employees. This section provides information on the upcoming rate reforms.

Will there be limits on what insurance companies can charge my employees and me?

Yes. There will be a number of limits on what insurers can charge. Beginning in 2014, they may only vary premiums based on scope of coverage (individual vs. family), geography, tobacco use, wellness program participation and age. The latter is limited to a 3-to-1 ratio. Rating can no longer take into account gender, health status, occupation, genetic information or claims history. Deductibles can’t exceed $2,000 annually for individuals and $4,000 for families and cost-sharing can’t exceed limits for HSAs.

Also, beginning with plan year 2010, the secretary and the state established a process for the annual review of premium increases. Insurers are required to justify “unreasonable” premium increases to the secretary of Health and Human Services and the state, and to post the information online.

States will be required to make recommendations to their exchange about whether insurers should be excluded from the exchange due to unjustified premium increases. States will receive up to $250 million from 2010 to 2014 to help them develop or enhance rate review programs.

Some states have also introduced or passed legislation to limit annual increases and/or require state approval of premiums. Learn more about the rate review program in your state here.

What does the new law do to control costs?

Reform is expected to reduce the deficit by $143 billion over the next 10 years by attacking waste, fraud and abuse and paying for quality over quantity. The law was designed to control and stabilize costs in a variety of ways: Expanding coverage to those previously uninsured will reduce cost-shifting; combining the purchasing power of small businesses and individuals through the exchanges will promote competition; creating standardized benefits options will encourage better consumer decision-making; and investing in wellness initiatives will prevent some chronic illness, to name a few examples.

The new law also encourages development of more efficient and cost-effective payment and delivery models for the long-term. Examples include the creation of advisory boards to explore ways to lower healthcare costs, promote quality and efficiency and expand access to evidence-based care, the testing of different models of paying doctors and hospitals to reward patient outcomes rather than number of visits and tests ordered, and research into the relative effectiveness of various treatments for specific conditions and illnesses.

Will there be malpractice reform under this new law?

The law establishes a five-year demonstration grant program for states to develop, implement and evaluate alternatives to the current system. The new grants will help states and healthcare systems test models that: (1) put patient safety first and work to reduce preventable injuries (2) foster better communication between doctors and their patients (3) ensure that patients are compensated in a fair and timely manner for medical injuries, while also reducing the incidence of frivolous lawsuits, and (4) reduce liability premiums.