HHS Releases Insurance Rate Review Proposal

December 21, 2010 (PLANSPONSOR.com) – Federal regulators on Tuesday proposed rules requiring insurers to publicly justify “unreasonable” rate increases starting in 2011.

A news release from the U.S. Department of Health and Human Services said proposed rate increases of 10% or higher will be publicly disclosed “and thoroughly reviewed to determine if the rate increase is unreasonable.”

According to HHS, after 2011, state-specific thresholds would be set using data and trends that better reflect cost trends particular to each state.  An insurance company’s justifications for unreasonable increases will be posted on HealthCare.gov and the insurance plan’s Web site, regulators said. Under the proposed regulation, states with effective rate review systems would conduct the reviews. If a state lacks the resources or authority to do thorough actuarial reviews, HHS will conduct them. 

By 2014, the Affordable Care Act empowers states to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance exchanges, HHS said.

HHS has already awarded $46 million to 45 states and the District of Columbia in August to help them improve their oversight of proposed health insurance rate increases. This is part of $250 million that the health reform law makes available to states to take action against insurers seeking unreasonable rate hikes.

“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,” said Jay Angoff, director of HHS’ Office of Consumer Information and Insurance Oversight, in the news release.

The proposed rule is at http://www.ofr.gov/OFRUpload/OFRData/2010-32143_PI.pdf.

A fact sheet is at http://www.healthcare.gov/news/factsheets/ratereview.html.  

An HHS letter to state insurance commissioners is at http://www.hhs.gov/ociio/initiative/letter_to_insurance_commissioners.pdf.