HHS Unveils New Rule For Insurance Premium Hikes

From NAHU News Wire

On Tuesday, HHS unveiled a long-awaited proposal to help regulate rate increases in the individual insurance market. Media sources characterized the regulation as not being particularly onerous for insurers, whose stocks rose following the announcement. The New York Times (12/22, A21, Pear) reports, "In a move to protect consumers, the Obama administration said Tuesday that it would require health insurance companies to disclose and justify any rate increases of 10 percent or more next year. State or federal officials will review such increases to determine if they are unreasonable, the administration said in proposing a regulation to enforce the requirement." This much-anticipated change "represents a major expansion of federal authority in an area long regulated by states." HHS Secretary Kathleen Sebelius "said the reviews would ‘help rein in the kind of excessive and unreasonable rate increases that have made insurance unaffordable for many families.’"

Politico (12/22, Kliff) reports that although double-digit "rates will not automatically be deemed ‘unreasonable,’ either state or federal regulators will have to review any proposed increases above the 10 percent threshold to determine whether they are justified." And, "while HHS does not have the power to deny or reject unreasonable rate increases, administration officials believe the greater transparency and scrutiny will discourage insurers from jacking premiums dramatically." According to Jay Angoff, director of the Office of Consumer Information and Insurance Oversight, "This does not give HHS authority to disapprove rates. … On the other hand, it does something arguably more important: make insurers make public their proposed rate increases and the assumptions they’re based on. If they know that they will become public, insurers will make sure their assumptions are reasonable and that they’re submitting moderate increases. It gives greater incentive to improve quality and drive down cost."

        The Wall Street Journal (12/22, Adamy, subscription required) says that according to HHS estimates, about 5,343 requests for rate increases would be impacted by the new rule, and approximately 773 of them may require a review. HHS also noted that ultimately, the 10% guideline would be replaced with specific ones for every state. Nevertheless, HHS underscored the fact that approving or denying rate increases is still the responsibility of states, not the federal government. The department said, "HHS’s determination that a rate increase is unreasonable would not have any effect on the issuer’s right to implement the rate increase, which is entirely a matter of state law."

The Hill (12/22, Millman) quotes Sebelius in its "Healthwatch" blog as saying, "The federal government won’t be doing review of rates where there is a thorough process at state level. … We won’t sit on insurance commissioners’ shoulders and question what they’re doing." But, "HHS can intervene and institute its own review if the department determines a state doesn’t have an effective program in place."

        The Washington Post (12/22, Aizenman) notes, "Many states also have laws that do permit their insurance regulators to reject rate increases. And the federal health-care law was designed to spur more states to follow suit by offering $250 million in funding to help them strengthen their rate review systems." To date, "45 states have received $46 million in grants," and "eventually, state officials will also have the option of barring insurers that show a pattern of unreasonable rate increases from selling their plans on state-run exchanges."

        The AP (12/22) reports, "This rule only affects policies sold in the individual and small group markets. Steep hikes in those markets have been a hot topic since early this year, when reports of Anthem Blue Cross rates rising as much as 39 percent in California helped reignite stalled health care overhaul legislation." Notably, the "insurer later withdrew the increase."

Reuters (12/22, Heavey), Bloomberg News (12/22, Armstrong), the CNN (12/22) "The Chart" blog, the NPR (12/22, Rovner) "Shots" blog, the Forbes (12/22, Whelan) "Health Dollars" blog, and Modern Healthcare (12/22, Barr, subscription required) also cover the story.

Sebelius Praises Rhode Island’s Efforts To Rein In Insurance Hikes. The Providence Journal (12/22, Salit) reports, "Federal officials held up Rhode Island as a model of health-insurance regulation and shined the spotlight on state Health Insurance Commissioner Christopher F. Koller during a news conference Tuesday announcing proposed regulations to better scrutinize insurer requests for rate hikes." Notably, HHS Secretary Kathleen Sebelius "invited Koller to Washington for the unveiling of a plan that would trigger a public review of rate-hike requests of 10 percent or more. States such as Rhode Island would continue to conduct their own reviews, she said, but the federal government would step in to analyze the validity of such requests in states lacking such rigorous regulatory processes."

Former NAIC President Says HHS Needs To Clarify New Rule. The Hill (12/22, Millman) reports in its "Healthwatch" blog, "Federal regulators will need to flesh out more details on how states should set up acceptable processes to review unreasonable health insurance premium hikes, a National Association of Insurance Commissioners (NAIC) official said Tuesday." Alt
hough the "proposed rule describes four criteria for an effective review process…NAIC past president Sandy Praeger said the organization will work with HHS to develop clearer guidance." Praeger said, "We’ll know at some point in the future. … There may be some additional guidance from HHS about what they want states to be doing, and I think that’s an ongoing process."

Advocacy Group Says Proposed Rule Should Be Tougher. The Hill (12/22, Pecquet) reports in its "Healthwatch" blog, "A California-based consumer advocacy group said Tuesday that federal regulations on health insurance rates should be ‘strengthened’ to ‘prevent insurers from imposing unreasonable premium increases on consumers.’" According to Consumer Watchdog, the new rule unveiled by HHS on Tuesday "doesn’t go far enough…and states should pass legislation enabling them to modify or deny rates deemed excessive." Carmen Balber, of Consumer Watchdog, stated, "Tuesday’s regulations give regulators a ‘bully pulpit’ to shame insurers into offering lower rates…but ‘at the end of the day, consumers will not be protected unless regulators also have the authority to reject unreasonable rates.’"