Health Insurance Rate Hikes Face Tougher Scrutiny
By Julie
Appleby
KHN Staff Writer
May 19, 2011 - Kaiser Health News
Health insurers seeking rate increases of 10 percent or more will face
increased scrutiny starting in September under rules finalized Thursday by the Obama Administration.
States – or in some cases the federal government – will review the flagged
premium increases and insurers will have to justify increases deemed
unreasonable. The law does not give the federal government power to reject
increases, but many state regulators have that authority.
The rules, required by the health care law enacted last year, also require
insurers to provide a broad overview of what they plan to spend the money on,
including how
much would go to medical services, profits and administrative costs.
gRecently, insurers have posted some of their highest profits in years c and
(yet) they continue to raise rates, often without any explanation or
justification,h Health and Human Services Secretary Kathleen Sebelius said in a
conference call with reporters. gThe framework of the Affordable Care Act is
beginning to change this.h
The rules are nearly identical to the proposal issued by HHS in December and
come amid continued concern about rapidly rising insurance costs. Such increases
have come even as many insurers have seen their costs slow as economically
strapped consumers cut back on medical care. Insurers criticized the
rules.
gFocusing on health insurance premiums while ignoring underlying medical cost
drivers will not make health care coverage more affordable for families and
employers,h said Karen Ignagni, head of Americafs Health Insurance Plans, in a
written statement.
gPremium review must adequately factor in all of the components that
determine premium rates,h Ignagni added, gincluding geographic variation, the
cost of new benefit mandates, and the impact of younger and healthier people
dropping coverage.h
Under the final rule, the 10 percent threshold will be in effect for rate
hikes starting Sept. 1 – two months later than originally proposed. But in
subsequent years, state-specific thresholds will be developed by the states in
conjunction with HHS, reflecting local market conditions.
Consumer groups were generally supportive, with Ethan Rome of the
left-leaning Health Care for America Now saying it puts insurers on notice that
gunjustified, double-digit premium rate increases will not be tolerated.h
Only insurance policies sold to individuals and small businesses – not those
offered to large employers -- are affected by the new rules. Administration
officials said they will seek additional comments on whether the rules should be
expanded to so-called gassociation health plans,h which are sold to individuals
and small businesses, but are pooled together in large groups.
Timothy Jost, a professor at Washington and Lee University School of Law,
said he is disappointed that the rules do not include association health plans.
gThatfs a huge loophole and an easy way for health plans to avoid scrutiny,h
said Jost.
Some consumer groups also took issue with the 10 percent standard, saying the
rule needed a secondary gtriggerh – such as increases that go beyond medical
cost inflation.
Without such a second option for review, the regulation could glock in a 9.9
percent increase as the de facto greasonableh rate,h the advocacy group Consumer
Watchdog warned in a letter to HHS.
The group also said the rules allow states to keep private from consumers
more in-depth financial details from insurers – information advocates say people
need to make their own judgments about rate increases.
gThe actual data backing up insurersf claims will still be private in many
states and the public will have no ability to question those assumptions,h said
Carmen Balber, director of Consumer Watchdogfs Washington office.
Under the rules, states with geffectiveh rate review systems will do their
own reviews of the increases. To be considered effective, states must show they
collect data sufficient to determine whether a rate increase is unreasonable and
allow for public comment about the increase.
If a state canft do an effective review, HHS would do it for them.
The law does not give the federal government the ability to reject increases.
That power rests with the states. According to the National Conference of State
Legislatures, about two dozen states have laws allowing regulators to
approve or disapprove of some types of insurance premium changes, although how
the authority is used varies widely.
In recent months, some state regulators have sought reductions. In Rhode
Island, the insurance commissioner lowered a requested 7.9 percent increase to
1.9 percent. After North Dakota policyholders complained, a proposed 24 percent
increase was lowered to 14 percent in April.
In the past year, some insurers in California withdrew double-digit increases
after regulators found mathematical errors in the companiesf calculations. But
another insurer, Anthem, this month moved ahead with increases of up to 16
percent, even after the increase was deemed unreasonable. Regulators there donft
have authority to reject increases, but are seeking legislative authority to do
so.
jappleby@kff.org
© 2011 Henry J. Kaiser Family Foundation. All rights
reserved.