March 8, 2011
New Mexico Senate
Santa Fe, NM 87501
Re: SUPPORT – Senate Judiciary Committee Substitute For Senate Public Affairs Committee Substitute For Senate Bills 208 & 499
Consumers Union, the nonprofit publisher of Consumer Reports magazine, strongly supports the substitute bill for SB 208 and SB 499 because it provides a transparent process that will bring new protections to New Mexico consumers who are now struggling to afford rising health insurance premiums.
Health insurance premium increases are soaring above the rate increases for wages, inflation, and medical costs. New Mexico consumers are not protected from excessive rate increases. Currently, the New Mexico Superintendent of Insurance has extremely limited authority to approve or disapprove rates. The existing authority does not give the Insurance Division of the Public Regulation Commission the information and tools needed to ensure that health insurance rate increases are justified. As a result, health insurance premiums have spiraled higher and higher, with many consumers hit with rate hikes higher than 20% last year.
Without real accountability and stronger checks on health insurance rates, more New Mexicans will become uninsured or underinsured. The substitute bill for SB 208 and SB 499 would improve New Mexico’s rate review process to include:
- A stronger standard of review requiring that rates must be actuarially sound, reasonable, and not excessive, inadequate or unfairly discriminatory.
- New criteria for evaluating whether rates are reasonable, including the company’s overall financial picture in New Mexico, compliance with the state’s new loss ratio standards, changes to benefits or plan design, and potential changes in the number of enrollees if the rates are approved.
- Stronger transparency for consumers to help them understand and consider rate hikes, including public disclosure on the Insurance Division website of a plain language explanation of the reasons for a rate increase, how much of the premium has been spent on actual medical care for the prior three years, and company financial information, such as surplus and reserves.
- New avenues for consumers to participate in the rate review process, such as a 30-day public comment period on a proposed increase and a right to appeal a decision on rates.
- New protections for consumers insured in individual market “closed blocks” – policies that are no longer being sold. Consumers in these policies are especially hard hit with high increases unless rate review requires broader risk spreading, as this bill would.
These changes will shed new light on health insurers’ rating practices and help consumers understand where their premium dollars are going. Consumers Union urges you to support the substitute bill for SB 208 and SB 499 to allow for enhanced review of potentially unjustified rate increases, and make rate review more open, thorough, and fair for New Mexico consumers.