How we review health rates
We review all rate requests for individual and small-group plans (employers with 1-50 employees) in Washington state.
Health insurance companies can't change rates more than once a year, unless state or federal law requires a new health benefit.
What we do
We scrutinize the company's projections and what they're based on, including the last three years' rates, enrollment, and claims.
We also examine the following information to see if the rate change is reasonable in relation to the plan's benefits:
- The rates, claims and administrative costs are consistent with what the company reported in its financial statement.
- The actual vs. projected medical and prescription-drug costs.
- The assumptions used to project the medical and prescription-drug costs, including changes in these costs, and in the benefit design.
- The actual vs. projected administrative costs, including expenses such as agent commissions, taxes, salaries, case-management activities, claims and appeals-processing costs, customer services, etc.
- How much profit the company expects to make; this is generally called "contribution to surplus" or "projected profit." Whether this amount is considered reasonable depends on the company's current level of surplus, as well as the type of business.
If we believe the rate request is justified, state law requires us to approve the increase.
If we don't believe the rate increase is justified we deny the increase. The insurer can then revise its rate-increase request, or it can request a hearing.
Why do my premiums increase?
You may be wondering why your premiums have gone up even though you and your covered family members are healthy and have had only minor claims.
This is because you and your family are part of a “pool of risk.” Rates for individuals and families and small groups are community rated, which means the rates are based on the combined claims everyone files. You pay a share of the pooled costs in exchange for getting the coverage you purchased.
The point of insurance is to share the cost of medical care among a larger group of people so that those with higher medical bills can still afford insurance. This is why your premium may go up even if you haven't filed a claim.
Factors that affect rates
In addition to the rising cost of medical care, these factors determine the cost of your premium:
- Your age and the age of any family members in your plan;
- Your family size;
- Whether or not you smoke;
- Where you live; and
- The benefits in your health plan.