JANUARY

Another issue with the rate review process is the availability of insurer premiums and
pricing assumptions to competing insurers. The ACA requires rate filing transparency and
an opportunity to allow for consumer feedback, although the level of detail required varies
by state. Because there are multiple rate filing rounds, this transparency means that rates
could be publically available, even before they are approved. As a result, insurers would be
able to mimic another’s pricing strategy, sometimes referred to as shadow pricing. In other
words, premiums can go up or down relative to initially filed rates for reasons other than
the adequacy of rates. This further emphasizes the need for an effective rate review that
considers not only whether premiums are excessive, but also whether they are inadequate.
Allow insurance sales across state lines
Under this option, insurers licensed to sell insurance in any particular state would be
allowed to sell insurance under that state’s rules in other states. The intention is to spur more
competition, which could increase consumer choice, lower premiums, and improve services.
For instance, an insurer could choose to follow the rules of a state with less restrictive benefit
requirements in order to offer lower-cost coverage in another state. Although states currently
have the ability to permit the sale of insurance across state lines, few have done so to date
and no out-of-state insurers have entered the market in those states. 63
Health insurance is licensed and regulated primarily by state authority. Prior to the ACA,
the rules regarding insurance issue, premium rating, and benefit requirements varied
considerably by state. The ACA narrowed state differences in these rules by imposing more
standardized requirements. Premium rate review and approvals continue to be conducted
primarily at the state level, as are other consumer protections such as network adequacy
requirements.
Allowing insurance licensed in one state to be sold in another would raise concerns
regarding how insurers would set up local provider networks and how consumer protections
would be enforced. In addition, with many of the rules currently harmonized across states,
there is less ability for insurers to take advantage of differences in rules in order to lower
premiums by avoiding certain requirements.
AMERICAN ACADEMY OF ACTUARIES 33