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HHS Awards $46 Million to 45 States, D.C., to Review Premium Hikes

By CQ Staff

August 16, 2010 -- The Department of Health and Human Services (HHS) announced the award of $46 million in grants Monday to 45 states and the District of Columbia to help them "crack down on unreasonable health insurance premium hikes."

However, while states plan to step up scrutiny of rate hikes using the money, in some cases they will still lack a system to actually reject proposed increases they don't like. Each of the 46 grant recipients received $1 million.

The health care overhaul law makes $250 million in such grants available over a five-year period, and the $46 million is the first installment.

All 46 grantees "will require insurance companies to report more extensive information through a new, standardized process to better evaluate proposed premium increases," HHS said in a news release. A total of 21 states and the District of Columbia "will expand the scope of their current review, for example by reviewing and requiring pre-approval of rate increases for additional health insurance products in their state," the release added.

Jay Angoff, director of the HHS Office of Consumer Information and Insurance Oversight, said in a news briefing that with the grants, "the vast majority" of states would have the power to deny proposed rate increases they view as unreasonable.

HHS officials also suggested that greater awareness by the public and by regulators of proposed increases will have an inhibiting effect on insurers. Because of tight budgets, states have not been able in a number of cases to provide this "transparency," but with the grant money they will, officials said. "We think the consumer picture is going to get considerably better thanks to this law," HHS Secretary Kathleen Sebelius said.

Sebelius noted that greater scrutiny of proposed increases in recent months by the Obama administration and by several states has led to the withdrawal of the increases or to their reduction. The proposed hikes turned out to be based in some cases on "faulty assumptions and data" that were revealed as a result of the increased scrutiny, she said.

In one such case in California, the state did not have the power to reject the hike but the insurer, Wellpoint, withdrew it following a public outcry.

HHS noted that in 2011 it will have the power under the health care overhaul law to review justifications for unreasonable increases in premiums and to make them public. However, HHS could not actually block rate hikes.

Legislation (S 3078) introduced by Sen. Dianne Feinstein, D-Calif., would give the secretary of Health and Human Services the ability to review premium increases in states where the insurance commissioner does not have sufficient authority to do so, and to block or modify them before they go into effect. Feinstein doesn't have the 60 votes needed to get the measure through the Senate, however.

HHS has posted a map showing how the 45 states and the District of Columbia plan to use new grant money to oversee rate hikes by insurers. Five states did not apply for grants: Alaska, Georgia, Iowa, Minnesota and Wyoming. "We will certainly follow up with this handful of folks and see if there is some logistical issue" behind their not requesting the money, Sebelius said.

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