WASHINGTON BUREAU — A proposed federal regulation could require health insurers to publicly disclose efforts to seek double-digit rate increases in the individual and small group markets.
The U.S. Department of Health and Human Services (HHS) has unveiled an early version of the proposed rate review rule today and intends to publish it Thursday in the Federal Register.
HHS would not necessarily assume that double-digit increases would be unreasonable, but it would give applications for large rate hikes close scrutiny.
“This new proposed rate review regulation will also work in conjunction with the medical loss ratio [MLR] regulation released Nov. 22 to make the health insurance marketplace more transparent and increase the value consumers receive for their health care premium dollars,” HHS officials say in a statement.
“These two provisions of the Affordable Care Act work together to assure consumers that any increase in their premium is reasonable and that their premium dollars are being spent on their medical care,” officials say.
The Affordable Care Act is the legislative package that includes the Patient Protection and Affordable Care Act (PPACA).
NUTS AND BOLTS
The proposed rate review regulation calls for states with “effective rate review systems” to conduct their own reviews.
If a state lacked the resources or authority to do thorough actuarial reviews, HHS would conduct the reviews.
At first, the same disclosure rules would apply to reviews performed by HHS or by state regulators.
HHS would post information about the outcome of all reviews of requested increases above 10%, and the insurers’ explanations of the increase requests, on the Web.
An insurer also would have to post justifications for big rate increase requests on its own website.
After 2011, a state-specific threshold would be set for the disclosure of rate increases, using data that reflect each state’s cost trends.
HHS says in a statement that it will finance state efforts to strengthen their own rate review processes.
The proposed regulation is designed to help “safeguard consumers from unreasonably high rate increases by providing consumers with detailed information on proposed increases,” HHS says. “Disclosing proposed increases, along with the insurer’s justification, would shed light on industry pricing practices that some experts believe have led to unnecessarily high prices.”
HHS says the disclosure rules would promote competition and encourage insurers to do more to control costs.
Officials note in a preamble to the proposed rule that they considered the idea of applying the rate review rules to the large group market but decided not to.
In response to an earlier request for comments issued in connection with another regulatory effort, “many commenters … suggested that the rate review process should not apply to rate increases in the large group market,” officials say. “Currently, our review of state law indicates that only 18 states have the authority to review rates for all or part of the large group market. Applying this regulation to the large group market would result in a process that is not closely aligned with most state processes upon which the regulation is modeled. In addition, many issuers are not accustomed to submitting proposed rate increases for review in this market.”
Officials note that they could add a rate review program for large groups, and they ask for comments about how a large-group review program might work.
Comments will be due 60 days after the official Federal Register publication date.
INSURANCE GROUPS REACT
America’s Health Insurance Plans (AHIP), Washington, put out a
statement contending that federal regulators lack the expertise that state regulators have to evaluate rate increase requests.
“States are best suited to review premiums because they have the experience, infrastructure, and local market knowledge needed to ensure that consumers are protected and health plans are solvent,” AHIP President Karen Ignagni says in a statement, “The federal government is not in position to make these assessments.”
The 10% rate review threshold does not adequately factor in all of the components that determine premiums, such as the cost of new benefit mandates and the effect of younger and healthier people dropping coverage, Ignagni says.
The Affordable Care Act already includes provisions that cap health plans’ administrative costs and profits, Ignagni adds.
Health insurance agents want regulators to keep the commissions paid to agents and brokers out of MLR calculations.
Officials at the National Association of Health Underwriters (NAHU), Arlington, Va., are sending members of Congress a letter seeking an MLR exclusion.
“Congress has the opportunity to preserve and protect consumer and employer access to the indispensable services provided by licensed insurance professionals,” NAHU officials say in the letter.
Passing such legislation “would advance the intent of current MLR standards to reduce overall administrative cost spending and maintain an important operational convenience for small businesses and individuals,” NAHU officials say. “Congress should ensure consumers have access to regulated professional benefit specialists by removing their compensatory stream of revenue from the MLR calculation.”