Proposed health insurance rules aimed at curbing unnecessary rate hikes
Tuesday, December 21, 2010; 10:00 AM
The Obama administration announced proposed rules Tuesday aimed at curbing large, unwarranted rate hikes by health insurers by subjecting them to mandatory public scrutiny.
Under the proposed regulation, which spells out the details of a key provision in the new federal health-care law, next year any insurer seeking a rate increase of 10 percent or more for an individual or small group plan would be required to file financial information justifying the raise with federal and state officials. (Beginning in 2012, the percentage rate increase that triggers the review will be adjusted for each state to reflect its particular market trends.)
State authorities would then analyze the data submitted by the insurer to determine if the increase is "unreasonable." If federal officials determine that a state lacks the resources or power to conduct such a review, the federal Department of Health and Human Services would step in to conduct it.
Either way, if a rate increase were found to be unjustified, that finding would be posted on both HHS's and the carrier's Web site along with the company's financial disclosures - including, for example, how much it is compensating top executives.
The law does not give federal officials the ability to reject the rate increase outright. However, administration officials say they believe that shining a spotlight on unreasonable increases could discourage insurers from moving forward with them.
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. So far 45 states have received $46 million in grants.
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 - markets through which individuals and small businesses will be able to buy private plans beginning in 2014, often with the aid of federal subsidies.
In states that opt out of running exchanges, the federal government will oversee them and will have the authority to bar insurers.
The proposed regulation, which was published in the federal register Tuesday, will be open for public comment and will likely take effect in six months, according to HHS officials.