In an effort to control rising health insurance rates and to bring transparency to the market, the federal government today announced new proposed rules requiring insurers to publicly disclose and justify large rate increases.
Kathleen Sebelius
Starting in January, proposed rate increases of 10% or higher will be publicly disclosed and reviewed to determine if the rate increase is reasonable, Health and Human Services Secretary Kathleen Sebelius announced Dec. 21. The effort will be conducted in collaboration with the states.
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The initial threshold for review is set at 10% next year, Ms. Sebelius said; however, starting in 2012, the states will set their own thresholds based on data and trends they gather. If a state is unable to do so, the proposed rule allows the HHS to do so.
Beginning in 2014, states will be able to exclude from the new health insurance exchanges any health plans that show a pattern of excessive or unjustified premium increases.
Ms. Sebelius said that the states will have the responsibility to keep insurance rates in check, and that the federal government is "not going to be sitting on state commissioners’ shoulders and question what it is that they’re doing."
Over the past decade, the average health insurance premiums for family coverage have risen 131%, according to the HHS. Some states such as Connecticut and Rhode Island already have the power to review and reject excessive rate increases but not all do and some lack the legal authority or resources to do so.
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"The proposed rate review policy will empower consumers, promote competition, encourage insurers to do more to control health care costs and discourage insurers from charging premiums which are unjustified," Jay Angoff, director of the HHS Office of Consumer Information and Insurance Oversight, said in a statement.
The Affordable Care Act makes $250 million available to states to take action against insurers seeking unreasonable rate hikes, and so far $46 million has been awarded to 45 states and the District of Columbia for improving oversight of health insurance rate increases, according to the HHS. The proposed rules will also work in conjunction with medical loss ratio regulations, which were released in November.
In a statement, Karen Ignani, president and CEO of the insurance trade group America’s Health Insurance Plans, said, "While the proposed rule gives consideration to the impact of rising medical costs, it also establishes a threshold for review that is incomplete because it does not adequately factor in all of the components that determine premiums, including the cost of new benefit mandates and the impact of younger and healthier people dropping coverage. Premium review must consider the unique circumstances of small employers that are struggling to afford coverage for their employees, and of the individual market in which people move in and out of coverage depending on whether they anticipate needing medical services." She added, "It is also important to remember that the new federal law already caps health plans’ administrative costs and profits. We welcome the opportunity to submit comments on this proposed rule."
The proposed rule will be open for public comment once it has been published in the Federal Register. A final rule could be issued in 6 months. More information is available on the HHS website.
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