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GAO-14-524R 1 (2014-05-28)

handle is hein.gao/gaobaahyi0001 and id is 1 raw text is: GAOU.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 May 28, 2014 The Honorable Orrin G. Hatch Ranking Member Committee on Finance United States Senate Private Health Insurance: The Range of Average Annual Premiums in the Small Group Market by State in Early 2013 Dear Senator Hatch: About 19 million Americans obtained health coverage through health insurance plans purchased in the small group market in 2011.1 These Americans included employees of small employers and their dependents. Not all small employers choose to offer health insurance to their employees and, while federal and state requirements have helped to ensure small employers and their employees have access to health insurance, small employers have consistently cited the cost of health insurance as the primary reason for not offering coverage to their employees.2 Insurers have historically set premiums for small group plans using some form of either medical underwriting or community rating, both of which were subject to regulation under state law.3 In general, such regulation included restrictions limiting how insurers could vary premiums for different small employers, the factors-such as, age, gender, and health status of employees- that could be considered when setting premiums rates for the employer group, and the range of variation among premiums rates across employers. Even with these restrictions, however, a small employer could be subject to significant increases in premiums from one year to the next if, for example, a single employee became seriously ill during the previous year. The Patient Protection and Affordable Care Act (PPACA) included a number of provisions that changed the requirements for small group health plans and that could affect the cost of premiums paid by small employers and their employees for such plans.4 For example, starting in January 2014, insurers are no longer able to consider the average health status of a small group to set premium rates and will be restricted in the amount they can vary premiums based 'Centers for Medicare & Medicaid Services, The 80/20 Rule: How Insurers Spend Your Health Insurance Premiums (Baltimore, Md.: February 15, 2013). 2The Kaiser Family Foundation, Health Research and Educational Trust, NORC at the University of Chicago, Employer Health Benefits: 2013 Annual Survey, (Menlo Park, Calif.; Kaiser Family Foundation, 2013). 3Medical underwriting is a process through which insurers consider the age, gender, health status, and other factors about employees when determining the premium rate for the group and use this information to set the rate for the entire group. Community rating is a system through which groups in the same geographic region in a state are charged the same premium rate for each health insurance product. Several states allowed adjustments to community rating-known as modified community rating-which permitted some variation in group premium rates based on factors such as age and gender of employees. 4pub. L. No. 111-148, 124 Stat.1 19 (2010). PPACA defines a small employer as having employed an average of 1 to 100 employees. Until 2016, a state has the option to define small employers as having employed an average of 1 to 50 employees during the preceding calendar year. See Pub. L. No. 111-148. § 1304(b), 124 Stat. 172 (codified at 42 U.S.C. § 18024(b)). GAO-14-524R Range of Health Insurance Premiums in 2013 Page 1

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