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Proposed Rule to Scrutinize 'Unreasonable' Premium Increases

By Stephen Miller  1/4/2010
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Proposed health care reform regulations announced by the U.S. Department of Health and Human Services (HHS) and published in the Dec. 23, 2010, Federal Register are intended to increase transparency and scrutiny of proposed health insurance premium rate increases for individual and small-business plans. The intent is to restrain "unreasonable" premium increases.

The proposed regulations would allow HHS to work with states to require insurers to disclose and justify publicly unreasonable rate increases. Specifically, the regulations would:

In 2011, require that all insurers seeking rate increases of 10 percent or more in the individual and small-group market disclose publicly the proposed increases and the justification for them. Such increases would not be presumed unreasonable but would be analyzed to determine whether they are unreasonable.

After 2011, a state-specific threshold would be set for disclosure of rate increases, using data and trends that reflect cost trends particular to that state.

States with effective rate review systems would conduct the reviews. If a state lacked the resources or authority to do thorough actuarial reviews, HHS would conduct them. Meanwhile, HHS would continue to make resources available to states to strengthen their rate review processes.

“Year after year, insurance company profits soar while Americans pay more for less health care coverage,” commented HHS Secretary Kathleen Sebelius in a statement.

“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,” added Jay Angoff, director of HHS’ Office of Consumer Information and Insurance Oversight.

Since 1999, average premiums for family coverage have risen 131 percent, according to HHS.

The Patient Protection and Affordable Care Act, enacted in March 2010, calls for states to strengthen or create rate review processes. On Aug. 16, 2010, HHS awarded $46 million to 45 states and the District of Columbia to help them improve their oversight of proposed health insurance rate increases. This was part of $250 million that the health reform law makes available to states to take action against insurers seeking unreasonable rate increases.

What's 'Unreasonable'?

HHS' proposed rule seeks to build on these efforts by requiring insurers in all states to justify publicly any unreasonable rate increases beginning in 2011. In 2011, proposed rate increases of 10 percent or higher will be disclosed publicly and reviewed thoroughly to determine if the rate increase is unreasonable. After 2011, state-specific thresholds would be set using data and trends that better reflect cost trends particular to each state.

Insurance company justifications for increases judged to be unreasonable would be posted on HHS' website and on the insurance plan’s website.

Starting in 2014, the health care reform law empowers states to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance exchanges.

HHS is accepting comments on the proposed rule through Feb. 21, 2011. Comments may be submitted electronically using the federal government's portal. In commenting, refer to file code OCIIO–9999–P.

Stephen Miller is an online editor/manager for SHRM.

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