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Premium Rate Review Proposal Survives Mostly Intact

By Jane Norman, CQ HealthBeat Associate Editor

May 19, 2011 -- Reaction was mixed to a final rule Health and Human Services officials announced that triggers state reviews of health insurance premium increases of 10 percent or more—a regulation that is largely the same as the proposal the agency issued in December.

The advocacy group Health Care for America Now praised the rule, saying it will bring an end to outrageous premium rate hikes and shine a light on previously secret data. "We encourage states to step up and aggressively scrutinize proposed rate hikes and provide consumers and businesses much-needed relief from price gouging," said Ethan Rome, executive director, in a statement.

But a consumer group said that not enough information was being demanded from health insurers, while the insurance industry remained unhappy that there's not more focus on the underlying drivers when it comes to health care costs.

The final rule preserves the role of states as the main entities responsible for analyzing whether proposed health insurance premium increases are "unreasonable," as required by the health care law (PL 111-148, PL 11-152).

The law did not give HHS the power to turn down rate increase proposals. But it did increase transparency and scrutiny in terms of the forms that insurance companies will have to complete explaining their increases. The forms will be posted on the Internet for public viewing.

That is not enough detail, though, said the group Consumer Watchdog. It said the rule will let states choose to a great extent how much information to make public in a rate filing. "By not requiring full transparency of the data insurers use to justify rate hikes, the rule does not allow the kind of public scrutiny necessary to pressure insurance companies into lowering unreasonable rates," it said.

America's Health Insurance Plans, which represents the insurance industry, found other faults with the final rule. Karen Ignagni, president and CEO, said in a statement that the public debate needs to be enlarged to understand the quickly rising cost of health care.

"Health plans are doing their part to restrain health care cost growth by partnering with providers across the country to change payment models to promote and reward safe, high-quality, cost-effective care," she said.

Ignagni also said the industry objects to "arbitrary" thresholds for rate review but agrees with HHS that rate regulation should be left in the hands of states.

Unchanged from the proposed rule is the requirement that insurers that want rate increases of 10 percent or more for non-grandfathered individual and small group plans will have to publicly disclose the proposed increases and the insurer's justification for it.

And HHS, as in the proposed rule, will serve as a backup for states that either don't have the authority under their own state laws or the money to effectively analyze premium hike proposals.

Perhaps the biggest change is that the final rule gives states some more time to beef up their review systems. The new regulation will apply to premium rate increases insurers file beginning Sept. 1, rather than July 1 as was originally proposed.

In addition, after Sept. 1, 2012, the 10 percent standard will be replaced with a state-specific one, using data on trends and costs specific to each state. The proposed rule also envisioned a temporary 10 percent standard.

States are eligible for grants to help improve their rate review processes.

Steve Larsen, director for the Center for Consumer Information and Insurance Oversight, said HHS also will begin taking comments on whether health insurance policies sold by associations for individual and small group coverage should be included for rate review. In some states, such associations are exempt from oversight.

"Our inclination, frankly, is to make that expansion," Larsen said in a conference call with reporters. He said many regulators suggested to HHS that associations be included.

The rule also adds a requirement that states have some kind of mechanism for public input on premium increases, he said.

Reaction from the Democratic author of the health care law was positive. "This new provision will help prevent unjustifiable insurance premium rate hikes that hit millions of Americans too hard," said Senate Finance Chairman Max Baucus, D-Mont. "Health reform puts consumers in the driver's seat when it comes to insurance policies and ends an era of insurance company abuses."

Rep. Rosa DeLauro, D-Conn., said her state fought a 20 percent increase in health insurance premiums proposed by Anthem. "This regulation will help to prevent health insurance companies from trying to implement outrageous premium increases and take advantage of American consumers," she said.

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