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Rate Review Starts for Policies Sold Through Associations

By John Reichard, CQ HealthBeat Editor

November 1, 2011 -- Starting this week some rate increases for health coverage provided through associations must be reviewed by government regulators to determine whether the hikes are reasonable in the government's view. The Nov. 1 effective date of the requirement brings association coverage under the same type of scrutiny that applies to other types of insurance plans in the individual and small-group markets.

The rate review procedure, established under the health care law (PL 111-148, PL 111-152), requires insurers to give a detailed explanation of their reasons for raising premiums if they propose an increase of 10 percent or more.

In some cases, state laws give regulators the power to reject rate hikes if they are deemed unreasonable. The federal government reviews rates in states lacking an effective rate review mechanism, but federal officials do not have the power to actually reject rate hikes that they say are out of bounds.

But Health and Human Services (HHS) officials say publicity about big increases that aren't justified has led insurers in a number of instances to scale back their increases.

"This step extends the benefits of rate review to an additional 1.8 million consumers, providing unprecedented scrutiny and transparency to health insurance rate increases," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services (CMS).

HHS officials said that by subjecting association plans to rate review, they are able to scrutinize a large chunk of the individual and small-group market that otherwise would escape review.

"This step also guarantees that insurers can't game the system and move coverage currently sold in the traditional individual and small-group markets to the association plan market to avoid the provisions of the rate review regulation," an HHS official said.

According to HHS data, 34 states will review association rates in the individual and small-group markets. In 10 states CMS will do some of the reviews and in 12 states CMS will review all rates for association products.

HHS issued a final rule in September determining the status of association coverage under rate review. A consumer group in Texas said that without bringing association coverage under rate review, many consumers in that state would not benefit from scrutiny of premium increases.

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