Earlier this year, Congress passed a health insurance reform law, known as the Patient Protection and Affordable Care Act. The centerpiece of the law is an individual mandate that all Americans will have health insurance, no later than 2014. To make this affordable, the law places new restrictions on the insurance industry that are designed to protect consumer rights and keep costs down. For anyone looking at health insurance quotes, it is important to understand how the new law will affect future rate increases.

Under the law, health insurance exchanges will be available in every state by 2014. These exchanges will pool individuals together in order to purchase one of several different plans on a group basis. The purchasing power of the group will then make the plans more affordable than if a person purchased insurance individually. The exchange itself will be a marketplace for the plans; the actual plans will be offered and run by private insurance companies. Once the exchanges are operational in 2014, every American will need to demonstrate proof of health insurance or face tax penalties. Insurance can be provided through an employer, a government program such as Medicare or Medicaid, an individual policy, or a group policy purchased through an exchange.

As part of the new law, states will have enhanced authority to review proposed rate increases for health insurance companies that participate in the exchanges. All rate increases will need to be justified, and unreasonable rate increases will not be permitted if the company wants to remain in the exchange. The law also provides for $250 million in grants to assist the states in this new responsibility of reviewing rate increases.

Additionally, the law includes several measures to help bring down the overall cost of health insurance. Beginning in 2011, insurance companies will be prohibited from using any more than 15 percent of collected premiums from large employer plans, and 20 percent of collected premiums from individual or small employer plans, on administrative costs or profits. This means that 80 to 85 percent of premiums must be spent primarily on health care. For those companies that violate these rules, consumer rebates will be required.

When reviewing health insurance quotes, keep in mind how the reform law will affect rate increases in the future. Today's quoted premiums will certainly go up at some point in time, but the new law should work to make such increases more reasonable and less frequent. As noted, some of the law's provisions are effective now or will go into effect next year. The availability of the exchanges, however, is delayed until 2014.

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