Governor Andrew M. Cuomo today announced that New Yorkers will save more than $500 million on health insurance premiums in 2013 because the Department of Financial Services (DFS) cut rate increase requests by insurers. The Governor emphasized that more needs to be done to control the cost of health care, which is the underlying reason premiums continue to rise. Health insurers requested weighted average increases of approximately 12.4 percent, but DFS, under the two-year-old law that gives it the power to review rate requests, cut the average increase to 7.5 percent. That is below the 10 percent increase in health care costs.
The DFS rate actions affect health insurance policies covering about 2.3 million New Yorkers, mostly in small groups, plus people covered by large group HMOs, individual direct-pay plans and Medicare Supplement policies. DFS approved new insurance company rate filings that will be used by insurers to charge premiums beginning in January.
Governor Cuomo said, "We have made progress in holding back rates, but we recognize that much more needs to be done. This Administration is firmly committed to making sure that health insurance is available to all New Yorkers. It must be made affordable by identifying ways that can be used to restrain the rising cost of health care services."
Benjamin M. Lawsky, Superintendent of Financial Services, said, "Rising health insurance costs are a major burden for businesses and families. The Department of Financial Services will continue to work with consumer groups, insurers, hospitals and other stakeholders to hold down the rate at which insurance premiums are increasing."
Elisabeth R. Benjamin, Vice President of Health Initiatives at the Community Service Society of New York and a co-founder of Health Care for All New York, which filed public objections to the insurers' rate requests, said: "This is a crucial victory for New York's small businesses and families who face a daily struggle with rising health care costs. These rate roll-backs demonstrate the profound impact health care reform is having on New Yorkers and our small businesses."
Blair Horner, Vice President for Advocacy, American Cancer Society Cancer Action Network (ACS CAN) of NY & NJ, said: "Better scrutiny of insurance rates has resulted in real savings that will benefit consumers. ACS CAN supports the administration's efforts to curb rate hikes and bring more accountability to insurers."
David McNally, AARP New York Manager of Government Affairs and Advocacy, said: "AARP commends Governor Cuomo for his leadership in helping consumers who, at the end of the day, are getting hit with the rising health insurance costs. AARP has long supported health insurance market reforms and greatly appreciates the Governor's actions in ensuring New Yorkers get a fair value when paying for their health insurance."
Ben Geyerhahn, New York Director for Small Business Majority, said: "We're pleased to see Governor Cuomo taking action to help small businesses by utilizing the New York's prior approval law. The average premium rate increase of 15.8 percent proposed by insurers in New York would have impacted 1.2 million employees and their families at small businesses. It's a relief to see the governor knock those rates down to an increase of practically half the size, at 9.6 percent. It means small businesses are looking at significant savings they can invest in growing their companies, thanks to the provision of healthcare reform that calls on insurance companies to justify proposed rate increases or lower them."
Todd Shimkus, Saratoga County Chamber of Commerce President, said: "The Administration's implementation of prior approval has been of great value and benefit to small businesses across New York State and their employees. It was not fair that insurers could for many years file and use whatever rates they wanted as was the case before. We knew if insurers had to justify their rates prior to their being approved as opposed to after the fact that health insurance rate increases would come down and consumers would benefit. Our members now not only benefit from getting better rates up front but also because the new law requires that those rates be in place by November 1st of each year so that employers and employees have plenty of time to compare rates and benefits to find the plan that best meets their needs."
This is the second year the Department has been permitted to review -- and potentially reduce -- insurer rate requests before consumers see changes in the premiums they pay.
The Department gained the authority to review rates under the Prior Approval Law, which was passed in 2010. Under that law, insurance companies must submit rate increase requests to the Department so the agency can make sure proposed rates are justified. The Prior Approval Law also requires insurers to spend 82 cents of every premium dollar on the health care services used by health insurance consumers. The balance of every premium dollar goes to insurer administrative expenses and profits.
Before the Prior Approval Law, a process called File and Use was in effect. Under that process, insurers had been permitted to impose rate increases on consumers without prior review and potential adjustment by the Department. Premiums went up an average of 14 percent a year during the 10 years File and Use was in effect.
Rates for small group plans will increase an average 9.5 percent, down from the 15.7 percent in average premium increases proposed by insurance companies. The Department also cut proposed increases in HealthyNY premiums by an average of more than 13 percentage points and it reduced by more than 5 percentage points increases insurers had sought in premiums for people who buy coverage as individuals.