Under proposed regulations issued December 21, 2010, health insurers in the individual and small group market must justify premium increases of 10% or more. States or the Department of Health and Human Services will have the authority to review the proposed increases and determine if they are reasonable. Given that many self-insured employer plans are experiencing cost increases of ten percent or more, it is curious why such increases are considered unreasonable in the insured arena. In addition, with the elimination of underwriting rules so that individuals cannot be denied coverage and children must be covered to age 26, it seems strange that market forces and the competition so touted by PPACA proponents are not self monitoring. After all, if I can enroll in any plan and can’t be turned down wouldn’t I enroll in the least costly plan thereby providing an incentive for an insurer to seek my business? We can only wonder how “unreasonable” will be defined from state to state. A 20% increase may indeed be excessive, but that does not mean it is not justified for a given book of business. Is this anything like the prudent man rule?
For the record, we have just placed the politicians smack in the middle of setting your health insurance premiums, never mind what may be justified or needed to sustain your coverage. Never let it be said that we let facts stand in the way of “reform.”
From HHS
Making the Market More Transparent
The amount of information about rate increases currently available to consumers significantly varies among States. Some States review proposed increases in health insurance rates and disapprove them if they are excessive. Other States lack the legal authority or resources to effectively review rates.
The proposed regulation will ensure that large rate increases in all States will be thoroughly reviewed.
The proposed regulation will:
- In 2011, require that all insurers seeking rate increases of 10 percent or more in the individual and small group market publicly disclose the proposed increases and the justification for them. Such increases are not presumed unreasonable, but will be analyzed to determine whether they are unreasonable.
- After 2011, a State-specific threshold will be set for disclosure of rate increases, using data and trends that better reflect cost trends particular to that State.
- 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 would conduct them. Meanwhile, HHS will continue to make resources available to States to strengthen their rate review processes.
Whether performed by States or HHS, information about the outcome of all reviews for increases above 10 percent, along with justification provided by insurance companies for those increases determined to be unreasonable, will be posted on the HHS website. The insurance plan will also have to make its justification for a rate increase available on its own website.
This regulation builds on the Affordable Care Act’s efforts to strengthen State rate review efforts. Importantly, we know rate review works. For example, Connecticut regulators recently rejected a proposed 20 percent rate increase after their review found that such an increase would be excessive. Unfortunately, some States lack the authority or resources to review proposed health insurance rates.
Related Articles
- Health Insurance Rate Hikes: Unreasonable if Excessive, Excessive if Unreasonable (reason.com)
- Insurer rate hikes to face fresh federal scrutiny (seattletimes.nwsource.com)
- HHS reg: Magic number is 10 percent (politico.com)
- The interventionist dynamic, health care installment #2,074 (marginalrevolution.com)
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