One of the more contentious issues in the development of rules under the Affordable Care Act has been the state insurance department revioew of large health insurance rate increases.
The Department of Health and Human Services (HHS) has issued a new federal rule to help define what constitutes an unreasonable health insurance rate increase. The new rule establishes an important baseline, according to Insurance Newsnet, for determining whether rate increases are excessive. The rule also provides a more rigorous process for holding insurers accountable, according to Consumers Union, the nonprofit publisher of Consumer Reports.
The new rule, which goes into effect on September 1, requires insurers who propose rate increases of 10 percent or more over a 12-month period would be subject to closer scrutiny by state and federal regulators as well as stricter public disclosure requirements. Essentially, they have to justify the rate increases and allow the public an opportunity to provide input about rate increases when they are subject to review.
New Rule Affects Small Group and Individual Markets
The new rule applies to health insurance policies sold in the individual and small group markets. Under the new rule, rate increases higher than 10 percent would be reviewed by states with rate review procedures meeting certain standards and by HHS for states that do not have such standards. Much like the rules under the Affordable Care Act for states to implement health insurance exchanges the fedewral government will step in if the state doesn't act.
If an insurer propses a 12% rate increase, for example, insurers would have to submit a "justification" to HHS and state regulators prior to implementing the rate hike. HHS will post such justifications on its website. In addition,insurers would also be required to post a justification on their websites for rate hikes that are above 10%.
While the power to deny or modify each proposed rate increase remains with the states, the authority and ability of states differs tremendously, depepnding on the rules of those individual states. Some state regulators closely examine proposed rate increases and insurers justifications, but other states have little capability to do so, according to Insurance Newsnet. In most states, consumers do not receive adequate information about rate increases and are not able to participate in the review process through hearings or other public forums. Most states have received federal grant funds authorized under the Affordable Care Act to improve their rate review process.
Consumer Advocate Stance
"Consumers are tired of double-digit rate hikes year after year at a time when many health insurers continue to make record profits," said DeAnn Friedholm, the director of Consumers Union's health reform campaign (www.PrescriptionForChange.org) tols Insurance NewsNet. "Too often, health insurers have been able to get away with raising rates without having to justify why premiums are going up. This new rule sets an important new standard for when rate increases are unreasonable and requires insurers to explain why those rate hikes are needed", she continued.Analysis
Could it be likely that the industry, becaus of these rles, will see an increase in 9.9% rate increases because in those circumstances no justification is required? That may be unintended consequence of the new rules. I don't believe that insurers will do this, except for maybe an insurer or two who skirt the ethical boundary. Anytime there is an artificial boundary with substantial consequences for stepping on the other side of that boundary, there may be unforseen difficulties that arise.
