Starting Sept. 1, health plans in the small group and individual markets that propose rate hikes of 10% or more must have their proposals vetted by either state or federal officials.
The mandatory review is a new requirement related to insurance premium review that has been released by the Health and Human Services Department and was required under the Affordable Care Act. The final regulation has been published in the Federal Register. The regulation does not apply to the large group insurance market or to small and individual plans that have “grandfather” status under the Affordable Care Act.
Under the regulation, states will take the lead when it comes to reviewing rate increase proposals. Federal officials will step in only when states don't have the resources or the statutory authority to review rates. Currently, insurance commissioners have differing authority based on state law, with some having the power to reject rate increases before they go into effect and others possessing more limited review powers.
Officials at HHS have encouraged states to beef up their oversight authority, and the agency has awarded about $44 million in grants to help with that process.
The final rule also includes a requirement that states give the public a chance to comment on proposed rate increases. And health plans are required to provide justification for their rate increases. HHS will post the outcome of all reviews on a rate increase of 10% or more at www.HealthCare.gov
The new regulation does not give states or the federal government new authority to deny rate increases. But Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at HHS, said that the ability to thoroughly review proposed increases and question the underlying assumptions is enough.
“Review, in and of itself, is in fact very effective in helping to ferret out reasonable and unreasonable rate increases,” Mr. Larsen said at a press conference to announce the new regulation.
Elizabeth P. (Beth) Sammis, Ph.D., acting Maryland Insurance Commissioner, agreed. Maryland has prior approval authority, allowing it to reject a premium increase if state officials conclude it is too high. However, she said in practice, that authority is rarely used. Typically, health plans voluntarily withdraw the higher rate increase after discussions with state officials.
“We're confident that insurers everywhere are already thinking twice and checking their math before submitting large rate hikes,” said HHS Secretary Kathleen Sebelius.
“This means millions of Americans will see savings to their own bottom lines,” she noted.
But America's Health Insurance Plans (AHIP), the trade group for health insurers, said HHS is missing the point with this regulation. “Focusing on health insurance premiums while ignoring underlying medical cost drivers will not make health care coverage more affordable for families and employers,” AHIP President and CEO Karen Ignagni said in a statement.
“The public policy discussion needs to be enlarged to focus on the soaring cost of medical care that threatens our economic competitiveness, our public safety net, and the affordability of health care coverage.”
Ms. Ignani also criticized the 10% threshold for review, saying that creating a “de facto presumption of unreasonableness” can influence the evaluation of the proposed rate increase.
The final regulation calls for the use of state-specific thresholds in September 2012.