State of Utah Insurance Transparency

Rates
Why
Factors
Premium
Participate
Quality
Glossary
Links

A brief explanation of rates and premiums

Rates and Premiums

The base price for health benefit coverage is known as a rate. Insurance companies take additional factors into consideration that make the cost of coverage higher or lower then the rate, this is known as an insurance premium. Premiums, the actual amount you pay as a policy holder, depend on the factors listed below.

Factors that determine your premium

  • Age
  • Gender
  • Selected benefits (deductible, for example)
  • Number of family members on the plan
  • Where you live in Utah
  • Health status

Additional factors for job-based coverage include

  • Selected benefits by employer
  • Contributed amount by the employer
  • Eligible employees participation
  • Length of time employer has been with the insurance company
  • Wellness programs

When you purchase your own insurance as an individual, you pay the premium. When you get coverage through your job, your employer pays the premium or you and your employer share the premium cost. Once a policy is issued at an established rate, the individual is placed in a pool with other consumers and any proposed rate increases are based on the overall claims experienced by all individuals in the pool.

Why does the State of Utah review insurance rates?

Why Review

Rates for insurance policies provided to individuals in companies with more than 50 employees are not subject to state regulation, so they do not undergo the rate review process. Typically, large group employers are able to negotiate rates directly with the insurance companies in order to get a group discount which keeps the premium at a lower rate. As an individual or small company purchasing your own insurance, you don't have the bargaining power that a larger company does and in the past, some insurance companies have taken advantage of this by implementing unreasonable rate increases on individuals who have no other coverage options.

The Utah Insurance Department reviews proposed premium rate changes requested by health insurance companies for the following types of policies:

  • Individual
    These policies are for people who do not have any job-based coverage options available to them. An Individual policy does not necessarily mean it is only for one person, families can be covered under individual policies
  • Small Groups
    These policies are for employers with 50 or fewer employees

Key factors in reviewing rates

Key Factors in Reviewing Rates

The Utah Insurance Department reviews proposed rates to make certain they are not excessive, inadequate or unfairly discriminatory. Factors used to validate the request include:

Company Coverage History

  • Past claim history detailing the cost of medical care and prescription drugs used by policy holders
  • Past and future loss ratios describing how much of every premium dollar goes to pay health care claims

Medical Trends

  • The amount benefit changes could increase or decrease overall costs
  • The potential for new contracts with hospitals, doctors, and other providers to increase the unit costs
  • Justification of a companies expectation that policyholders will use more or fewer medical services or a different type of service in the coming year.
  • "Margin" or padding in the company's projections
  • Extent of insurer's members aging or additional changes to demographic characteristics changing
  • The average Utah and national trends in medical claims costs

Administrative Costs

  • Projected growth as a company in order to determine overhead and future administrative costs
  • Company spending on salaries, agent commissions, marketing, advertising and other areas of expense
  • The overall financial strength of the company

How your premium dollar is spent

How your Premium Dollar is Spent

80% Medical Claims
15% Operating Costs
5% Profit

Part of the information collected by the Utah Insurance Department from insurance companies is used to determine how health care premiums paid by Utahns is spent. Insurance companies must report the total amount of premiums collected for a given date range and then state how much was spent on medical claims, operating costs and how much was retained as profit. As part of the rate filing process, insurance companies must project how they will spend your premium dollar if the rate change is approved. An aggregate of all the data from all insurance groups is provided to determine the percentages, so the breakdown may not match specific company data.

According to current data collected, for every premium dollar paid, insurers spend an average of $0.80 on medical claims, $0.15 on operating costs, and $0.05 is retained as profits. During a rate review process, the Insurance Department will watch for requests that vary from this range as part of the decision on whether the rate increase or decrease is appropriate.

Participate in the rate review process

Participate in the Rate Review Process

Individuals are encouraged to take part in the rate review process by commenting online. You can use healthrates.utah.gov to look up a rate request, the most recent rate activity of insurance companies are displayed on the home page under the section entitled "Latest Rate Changes".

The date column, on the "Latest Rate Changes" table, provides the company's submission date of the proposed rate change to the Insurance Department. The status of a company's proposed rate change is reflected using one of five categories:

Submitted- The insurance company has formally proposed a rate change but it has not yet gone through the review process. Public comments can be made for a period of 30 days from the submission date by selecting the "View Details" option; this will navigate to the "Rate Filing" page, which provides a comment section.

Under Review- The public commenting period is now closed and the Insurance Department is in the final stages of making a decision.

Rejected- The filing did not contain sufficient documentation to complete the review process. The filing is not considered filed with the department.

Withdrawn- The insurance company has decided to withdraw the proposed rate change prior to a decision being made from the Insurance Department.

Accepted- The Insurance Department completed the rate review process and found the proposed rate change to be reasonable.

Denied- The Insurance Department completed the rate review process and found the proposed rate change to be unreasonable.

This guide provides information on the issues related to the decision making process of the Insurance Department when reviewing a rate request. As part of the filing, a company must submit a Rate Summary Worksheet to the Insurance Department; this worksheet is available to view under the "Attachment" section of the "Rate Filing" page for the insurance company. In order to make your comment meaningful, address the issues applicable to the filing.

Quality measures explained

Quality Measures

While the cost of health benefit coverage is a major concern of the Utah Insurance Department (UID), the quality offered by the individual plans is another important area of focus. Each year, an independent vendor is selected by the Utah Department of Health to conduct a survey entitled the Consumer Assessment of Healthcare Providers and Systems (CAHPS). The purpose of this survey is to gather information about how satisfied different health plan members are with the care they received over the past year, those results are then compared with scores from other plans and national averages.

Results from the CAHPS survey are broken out between commercial HMO plans and PPO plans in order to provide a more accurate average and representation between comparable plans. The survey also makes the distinction between adults (18 years and older) and children by collecting and displaying the data for each age group every other year. Adult CAHPS information is displayed for odd calendar years and children's information is displayed for even calendar years.

Star Ratings

Survey results for each health plan are compared to the Utah average using a one to three Star rating. PPOs and commercial HMOs are separated out from other health plans and individual averages are calculated for each.

Highest Score is significantly above the Utah average

Average Score is not higher or lower than the Utah average

Lower Score is significantly below the Utah average

Satisfaction Measures

Rated by members on a scale of 0 (worst plan possible) to 10 (best plan possible). The graph for these satisfaction measures represent the percentage of members who gave their health plan an 8, 9, or 10.

  • Health Plan Ratings: This measures how satisfied Utahns are with their own health plans
  • Health Care Ratings: This measures how satisfied Utahns are with the health care they have received over the past year

Member Quality and Access Measures

Rated by members using one of the following terms "Never", "Sometimes", "Usually", and "Always". The graph for these quality and access measures represent the percentage of members who gave their health plan a score of "Usually" or "Always"

  • Getting Care Quickly: Several questions are asked to determine how often Utans received their care quickly
  • Customer Service: Several questions are asked to determine how often good customer service is provided

Glossary of insurance related terms

Glossary of Terms

Affordable Care Act (ACA) - Federal health reform passed in March 2010 designed to provide consumers with better protection through the analysis and corresponding transparency of health insurance rate increases in the individual and small group markets.

Claim - A notice made to an insurance company on behalf of the insured individual, which indicates under the terms of their policy, a cost may be covered.

Copayment - A fixed flat-dollar fee an individual is responsible for paying on a covered health care service. The amount can vary depending on the type of covered health care service (for example, outpatient, ER, specialty).

Deductible - A dollar amount an individual must pay for health care services before your health insurance or plan begins paying claims under a policy. For example, if your deductible is $500, your plan will not pay anything until you've met your $500 deductible.

Group Health Plan - A benefit plan established or maintained by an employer, an employee organization, or both that provides medical care for participants and/or their dependents directly or through insurance reimbursement or otherwise.

Health Maintenance Organization (HMO) - A type of managed care organization (health insurance plan) providing health care coverage to members through a specific network of participating hospitals, clinics, physicians and other health care providers.

In-Network Provider - A health care provider that has contracted with a managed care organization (such as an HMO or PPO) to participate in a designated network. As part of the contract, the provider agrees to rules and fee schedules set forth by the managed care organization and agrees not to charge patients for costs above the agreed upon fee.

Medicaid - A program that is jointly financed by the state and federal government to provide health care coverage to individuals with limited income and resources. While each state has the ability to customize their Medicaid program, there are mandatory benefits and eligibility groups that federal law requires them to provide. The Affordable Care Act extended eligibility for Medicaid by setting a new national minimum.

Medicare - A program offered by the federal government that provides health care coverage to individuals who are age 65 or older regardless of income or resources. Certain individuals under the age of 65 with disabilities are also eligible for coverage.

Out of Pocket Limit - The maximum amount an individual would pay during a specified policy period before their health insurance or plan starts paying 100% of the allowed amount. An individual would still be responsible for paying their premium during the policy period. Depending on the health insurance policy or plan, they may not count co-payments, deductibles, co-insurance payments, or out of network payments towards the limit.

Patient Protection and Affordable Care Act (PPACA) - Also known as the health reform law, this is part of the federal statute passed in March 2010 to reduce the cost of health care in the United States. Under this act, insurance companies must offer the same rates to all applicants regardless of pre-existing conditions or gender.

Preferred Provider - A provider who has a contract with an individual's health insurance or health plan to provide services at a discounted rate. Providers with a "Preferred" status generally offer services at a greater discount than providers with a "Participating" status.

Preferred Provider Organization (PPO) - A type of managed care organization (health insurance plan) providing health care coverage to members through a network of providers. Individuals with a PPO plan pay a higher price for services received from an out-of-network provider.

Premium - The amount an individual must pay for health insurance or plan coverage.

Qualified Health Plan (QHP) - Health insurance policy that is sold through a regulated health insurance Exchange. As part of the PPACA, plans sold within the Exchange must meet minimum standards contained within the law.

Rate Review - Review conducted by the Utah Insurance Department of proposed premium rate changes. There are three primary components of the rate review process that the reviewers take into consideration, they want to make certain that the change still allows sufficient funds to pay all claims, they want to ensure that any increases are not too high with respect to the benefits being provided, and finally, they want to make certain that the rate change does not unfairly discriminate against any individual or group of individuals.

Self-Insured - A group health plan where the employer assumes the major cost of providing health care benefits to employees, usually by directly funding the health benefits. Administration of self-insured plans involve the employer or a selected third party administrator paying claims, resolving disputes, and negotiating payment rates. In contrast, a fully insured plan has the insurer assuming all of the risk by guaranteeing benefits under a contract.

Small Group Market - Serves health care needs of small businesses by providing health insurance coverage for employers with 2 - 50 employees.