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HHS Announces New Grants to Spur States to Scrutinize Premium Increases

By Rebecca Adams, CQ HealthBeat Associate Editor

September 20, 2011 -- Insurers and administration health officials sparred over a federal push to convince state officials to more closely scrutinize insurance premium increases. The two sides traded charges as the Department of Health and Human Services (HHS) announced $109 million in grants to help 29 states push back against proposed premium increases.

States that have enacted laws that give officials the right to disapprove premiums they consider excessive received the most money.

Earlier this month, a provision in the health care law (PL 111-148, PL 111-152) affecting rate review went into effect. The provision requires health insurers who want to increase their rates by 10 percent or more in the individual and small group market to justify the increases in writing.

This round of grants is the second cycle of awards to encourage states to more closely monitor insurance rate increases. It builds on $48 million that was provided in August 2010 to 43 states and five territories. The health care law will provide a total of $250 million in such grants.

All of the states in the new round received at least $3 million. Twenty got at least an additional $600,000 for having in place systems that give state officials the power to reject premium increases, said HHS officials. Steven Larsen, director of the Center for Consumer Information and Insurance Oversight, said that those states need the money because they have a heavier workload than others.

"We continue to encourage states to seek full prior approval" of proposed premium increases, said Larsen.

All of the states that got awards said they would improve their websites and beef up rate filing requirements, such as insisting that insurers disclose more information on their administrative costs. Twenty of them said they would increase scrutiny by taking on reviews of premiums in new markets or for new products. And in seven states, legislation will be introduced to strengthen regulators' authority to review and/or publicize proposed rate increases.

Health insurers fought back by arguing that simply refusing to allow insurers to raise premiums above certain thresholds is not the right way to hold down prices for consumers. They said that premiums are based on underlying costs for medical services.

"Highly publicized provisions such as premium rate review may make for good sound bites, but literally do nothing to address the soaring cost of medical care," said a blog post on the website of the trade association America's Health Insurance Plans (AHIP). The group said that federal data show that between 2000 and 2009, the growth in health care premiums tracked directly with the growth in benefits.

HHS officials plan to announce further funding for states in 2012.

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