Little noticed in last week's media frenzy over the private life of a certain former governor was the introduction of new regulations to protect consumer against large increases in their health insurance premiums.
Effective Sept. 1, premium increases of 10 percent or more in individual and small-group health plans must be reviewed by state officials. If they are unwilling or unable to do so, the Department of Health and Human Services (HHS) will step in.
“For too long, insurers have been able to hit consumers with double-digit premium increases, with no guarantee that the hikes were justified. By giving consumers more information about what’s behind premium hikes and requiring insurers to justify rate increases, these new rules will help protect consumers from rising costs," said U.S. PIRG Health Care Advocate Larry McNeely.
“With premiums continuing to rise, consumers deserve to know if their insurer is ripping them off. Strong rules in states like Oregon have already saved consumers millions of dollars. With these new rules in place, it’s time that other states follow Oregon’s example.”
The regulation is part of the Affordable Care Act, popularly known as Obamacare.
HHS has awarded $44 million in Affordable Care Act grants to states to help strengthen their oversight capabilities. An additional $200 million will continue to be available to states under the Act.
Starting September 2012, the 10-percent threshold will be replaced by state-specific thresholds that reflect the insurance and health care cost trends in each state. The final rule clarifies that HHS will work with states in developing these thresholds.
“Effective rate review works – it does so by protecting consumers from unreasonable rate increases and bringing needed transparency to the marketplace,” said HHS Secretary Kathleen Sebelius. “During the past year we have worked closely with states to strengthen their ability to review, revise or reject unreasonable rate hikes. This final rule helps build on that partnership to protect consumers.”
Publication of the final rule comes as health insurance companies have reported some of their highest profits in years. One cause for these profits is that actual medical costs are growing more slowly than what insurance companies projected when they set their 2011 rates last year. However, many of the rates consumers and small employers pay today don’t reflect these lower costs, HHS said.
The rule requires insurance companies to provide consumers with easy to understand information about the reasons for unreasonable rate increases and post the justification for those hikes on their website as well as on the HHS Affordable Care Act website, www.healthcare.gov .
“Strong and transparent rate review processes are necessary to help bring down costs for consumers,” said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight. “Rate review will ensure that increases are based on reasonable estimates and real-time data on medical cost trends and health care utilization.”
The regulation finalizes proposed rules issued in December 2010. It has several additions to the proposed rule, including a requirement that states provide an opportunity for public input in the evaluation of rate increases subject to review. This will strengthen the consumer transparency aspects of the new rule. HHS is also requesting comment from the public on applying the rule to individual and small group coverage sold through associations, which is sometimes exempt from state oversight.