Bringing Balance to the Market: A Roadmap for Improving Health Insurance Affordability Through Rate Review

Policy Points

• Health care providers have become increasingly consolidated, with hospitals and health systems using their market power to demand ever-higher reimbursement rates from commercial health plans.
• Employer-sponsored health insurance, the primary source of coverage for people under age 65, has come under increasing strain in the face of rising costs.
• States can use an enhanced form of health insurance rate review to counter the monopolistic power of hospitals and health systems, reduce cost growth, and provide premium relief to consumers and employers.
• This report provides a step-by-step roadmap for states to design, build support for, implement, and maintain a successful and effective enhanced rate review program. 

Abstract

Unsustainable increases in health care costs are leading to high rates of medical debt, sapping the vitality of small businesses, straining state budgets, and dampening wage growth.^1,2,3 States have the power to help reduce health care costs, and several are pursuing policies to do so. However, when attempting to target the root cause of the affordability problem — high and rising provider prices — states have faced two primary challenges: (1) enforcing industry adherence, and (2) ensuring that savings are passed on to consumers. An “enhanced” form of health insurance rate review can help solve both problems. Rhode Island, the first state to implement enhanced rate review to ensure premium rates are fair for consumers, has documented savings for insurer members, as has Colorado.^4,5,6 Delaware has adopted a similar program, and Vermont, Massachusetts, and New Jersey are considering doing so.^7,8,9 This report provides a roadmap for states to take control of unsustainable health care cost increases and deliver direct premium relief to consumers by leveraging the rate review process. 

Notes

1. McGough M, Winger A, Rakshit S, Amin K. How Has U.S. Spending on Healthcare Changed Over Time? Peterson-KFF Health System Tracker. Published Dec. 15, 2023. https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#Total%20national%20health%20expenditures,%20US%20$%20Billions,%20 1970-2022. 
2. Collins SR, Roy S, Masitha R. Paying for It: How Health Care Costs and Medical Debt Are Making Americans Sicker and Poorer. Commonwealth Fund. Published Oct. 26, 2023. https://www.commonwealthfund.org/publications/ surveys/2023/oct/paying-for-it-costs-debt-americans-sicker-poorer-2023-affordability-survey. 
3. Fisher ES, Koller CF, Colla CH, Berube A. Not Just Squeezing the Balloon: A Comprehensive Set of State Strategies for Addressing Health Care Cost. Milbank Memorial Fund. Published Oct. 9, 2024. https://www.milbank.org/publications/ not-just-squeezing-the-balloon-a-comprehensive-set-of-state-strategies-for-addressing-health-care-cost/. 
4. Baum A, Song Z, Landon BE, Phillips RS, Bitton A, Basu S. Health Care Spending Slowed After Rhode Island Applied Affordability Standards to Commercial Insurers. Health Aff (Millwood). 2019; 38(2):237-245. https://www. healthaffairs.org/doi/10.1377/hlthaff.2018.05164. 
5. State of Colorado, Division of Insurance. Polis-Primavera Administration’s Landmark Reinsurance Effort Will Save Coloradans $493 Million on Healthcare Premiums in 2025, Putting Money Back in the Pockets of Hardworking Coloradans. Published Oct. 17, 2024. https://doi.colorado.gov/ polis-primavera-administrations-landmark-reinsurance-effort-will-save-coloradans-493-million-on. 
6. Murray R, Whaley CM. Can Public Option Plans Improve Affordability? Insights from Colorado. Health Affairs Forefront. Published January 15, 2025. https://www.healthaffairs.org/content/forefront/ can-public-option-plans-improve-affordability-insights-colorado 
7. State of Vermont, Green Mountain Care Board. Guidance on the Assessment of Affordability in the Review of Rates. Draft published Mar. 19, 2024. https://gmcboard.vermont.gov/document/ guidance-assessment-affordability-review-rates. 
8. Commonwealth of Massachusetts, Health Policy Commission. 2023 Annual Health Care Cost Trends Report: Policy Recommendations. Published Sept. 2023. https://masshpc.gov/sites/default/files/2023%20CTR%20 Recommendations.pdf. 
9. State of New Jersey, Department of Banking and Insurance. New Jersey Affordability Standards Report: 2024. Published Sept. 25, 2024. https://www.nj.gov/dobi/division_insurance/HART/reports/ NJAffordabilityStandardsReport2024.pdf.