The department said it will conduct on-site audits of health insurers and HMOs selling health insurance plans regulated by the state with the help of a private accounting firm.
The audits will review selected rate requests that already were filed. Data regarding claims, insurer administrative expenses, premiums and claims reserves will be examined, the department reported.
Insurers will not know beforehand whether their proposals will be the subject of an audit.
“At a time when spiraling health insurance costs are an incredible burden for working people, it is essential that we ensure that rate requests are based on fair, accurate information that has not been manipulated,” said Benjamin M. Lawsky, superintendent of financial services, in a statement. “These in-depth audits will allow us to drill down underneath the numbers to make sure they are accurate. For example, we can look at whether insurers are accurately allocating administrative costs and broker commissions.”
The audits are funded by a $4.4 million grant awarded by the U.S. Department of Health and Human Services (HHS) in September 2011. The grant is one of several issued to enhance premium rate review, improve public access and lend more transparency to the processes used to establish health insurance premiums, part of the Obama Administration’s use of the powers granted in the Patient Protection and Affordable Care Act.
Under a new law, health insurers must submit their proposals to increase their premiums to the department to be approved, reduced or rejected in 60 days.
For contracts which started on or after Jan. 1, health insurers requested weighted average increases of 12.7%, but the department granted increases of 8.2%. The lower increase will save consumers more than $400 million in 2012, the department reported.