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Administration Touts Rules That Soften the Hit from Proposed Rate Increases

By Rebecca Adams, CQ HealthBeat Associate Editor

September 11, 2012 -- Two insurance rules stemming from the 2010 health care law appear to have saved consumers $2.1 billion this year, according to a new report released by the Obama administration. However, an administration official said it is difficult to say definitively how much money state insurance regulators might have saved anyway had the overhaul never been enacted.

One of the health care law (PL 111-148, PL 111-152) regulations forces insurers to justify premium increases of 10 percent or more. That has led to reductions in insurers' original proposed rate hikes, which the administration says saved nearly 800,000 consumers a total of about $1 billion.

Another overhaul rule requires small-group and individual market insurers to spend at least 80 percent of premium dollars on benefits or provide rebates. That rule, known as the medical loss ratio regulation, last year saved nearly $1.1 billion that was spread among 13 million consumers, for an average rebate of about $151 per household.

Forty-four states now have programs to oversee insurers' requests for proposed increases, according to Health and Human Services officials. The Obama administration looks over the proposed increases in states that do not have review programs.

Gary Cohen, director of HHS' Center for Consumer Information and Insurance Oversight (CCIIO), told reporters during a recent call that state insurance commissioners made 69 percent of the rate review decisions and HHS determined the other 31 percent.

It's difficult to quantify the effectiveness of state regulators in holding down proposed increases before the law was enacted, Cohen said, because states did not have to report that information in a uniform way before the overhaul.

HHS officials have given $160 million in grants to 45 states, the District of Columbia, and territories to bolster their rate review programs or let consumers know about them. There is $90 million in grant money left for this year and 2013.

About 36 percent of the proposed rate increases that represented a 10 percent or higher boost went through without changes, said the report. But about 12 percent of proposed increases were withdrawn during review, an additional 26 percent were rejected and another 26 percent were changed, according to HHS.

Regulators reduced proposed rate increases by 2.8 percentage points on average.

With the issue of health care costs figuring prominently in the congressional and presidential campaigns, Democrats are touting the findings as evidence that the health care law is helping consumers.

House Democratic Whip Steny H. Hoyer, D-Md., praised the report.

"Democrats will continue working to make sure the Affordable Care Act is fully implemented," he said. "Already, Republicans in the House have voted over 30 times to defund or repeal the law. I continue to call on them to cease their attempts to end a law that has yielded so many benefits to American families and has brought real savings to individuals and to our economy as a whole."

But Republicans countered that a report showing that some insurance spikes may be less than insurers originally sought does not prove that the 2010 law is holding down costs in a significant way.

Some GOP lawmakers noted that a nationwide study by the nonpartisan Kaiser Family Foundation shows that on average, health care premiums for large employer-sponsored plans rose about 4 percent this year.

"This report is an election year gimmick that ignores the true total cost increases of the new health care law," said Michael B. Enzi, R-Wyo., the top Republican on the Senate Health, Education, Labor and Pensions Committee. "What this administration does not want people to know is that the new mandates contained in the health care law are significantly increasing the cost of insurance, which will make it harder for many Americans to purchase affordable coverage. Despite claims to the contrary, it is clear that the new health care law will increase insurance costs for all Americans."

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