Health insurers will be under government scrutiny
Wednesday, December 22, 2010
The Obama administration issued rules Tuesday that will subject health insurers to unprecedented - if limited - government scrutiny of their rates, fleshing out a key provision of the health-care overhaul law.
The proposed regulation will require any insurer seeking to raise rates on an individual or small-business plan by more than 10 percent next year to file financial information justifying the raise to federal and state officials.
State authorities then would analyze the data to determine whether the increase is "unreasonable." If federal officials judge that a state does not regulate insurance often enough to be able to conduct such a review, the Department of Health and Human Services would do it.
Either way, if the rate increase were found to be unwarranted, that verdict would be posted on both the HHS web site and that of the carrier along with the company's financial disclosures - including, for example, the salaries it pays top executives.
Consumer advocates hailed the move as an important victory.
"No longer will the insurance industry be able to operate in a wild, wild West through unreasonable premium increases without any accountability," said Ron Pollack, executive director of Families USA, in a statement.
Although several dozen states already empower their insurance officials to reject some rates deemed unjustified, the new statute stops short of giving federal officials that authority. Nor does it mandate that states that do not require approval of rate increases begin doing so. (Although it does provide $250 million in grants to help states strengthen their oversight of health insurers.)
Secretary of Health and Human Services Kathleen Sebelius said she believed simply spotlighting unreasonable rates could substantially curb staggering double-digit yearly spikes and a 131 percent rise in average premiums for family coverage since 1999.
In the individual and small business markets, people "often don't know what their choices are," Sebelius said at a news conference. "Publicizing the fact that these rates don't stand up to actuarial review, that they are not based on underlying health trends and then giving consumers . . . options for other possibilities is a huge step forward."
Sebelius added that in states where rates currently are reviewed, officials often uncover faulty calculations by insurers. That occurred earlier this year when Wellpoint, one of the nation's largest insurers, proposed to raise rates by as much as 39 percent for Californians with individual policies; under pressure, it later dropped that plan.
Eventually, state officials also will have the option of barring insurers with 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. Furthermore, in states that opt out of running exchanges, the federal government will oversee them and have the ability to bar insurers.
HHS officials said they chose to make the trigger for a rate review a 10 percent premium increase based on their analysis of rising medical costs, but starting in 2012, they will adjust the threshold on a state-by-state basis to more accurately reflect the market conditions in each.