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HHS to Provide States With Funds to Review High Health Rate Hikes

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The Department of Health and Human Services will be providing $199 million to states to help defray the cost of reviewing health insurance premium rate increases of more than 10%.

Other funds will also be available as HHS seeks to enlist the states in its efforts to reduce the growth in healthcare costs.

The grants will also give the states that accept them the power to stop unreasonable premium increases from taking effect, HHS says.

Incentives to states to get tough on large rate hikes by health insurers will include $50 million in additional grant funds to states with large populations and $27.5 million to states that have (or enact) the authority to approve or disapprove rate increases, HHS says.

Steve Larsen, head of the Center for Consumer Information & Insurance Oversight, Centers for Medicare & Medicaid Services, and the U.S. Department of Health and Human Services, said the funds will be in addition to $46 million awarded last August to help 45 states and the District of Columbia crack down on unreasonable premium hikes.

The agency said it will provide up to $1 million per year for the next three years to states this year that apply for the grants this year. States can apply next year to get $1 million per year for two years, HHS officials say.

The funds, available through provisions of the Patient Protection and Affordable Care Act, total $199 million over 2 years, Larsen says.

In addition, “workload” grants totaling $22.5 million will be distributed to states with larger populations and more health insurers. And “performance” incentives totaling $27.5 million will be awarded to states that have or enact rate increase review systems.

In disclosing the new program, Larsen defends the agency against criticism by insurers that the rate review program doesn’t address underlying growth in healthcare costs.

Larsen says there are “many” components of the PPACA that address reining in growth in healthcare costs, citing the medical loss ratio formula as one example.

The MLR formula will require insurers “to spend at least 80% of premium dollars on health care and quality-improvement activities as opposed to overhead, marketing, CEO salaries, and profits,” he says.

And, he adds, “The PPACA includes a wide variety of provisions designed to promote accountability, affordability, quality and accessibility in the health care system for all Americans, and to make the health insurance market more consumer-friendly and transparent.”

For example, insurers are generally required to meet a medical loss ratio standard to spend at least 80% of premium dollars on health care and quality-improvement activities as opposed to overhead, marketing, CEO salaries, and profits.

The grant program announced today will help states process reviews under HHS rule, proposed last December, requiring health insurers to publicly disclose that they are seeking rate increases of 10% or more in the individual and small group markets.

Under the regulation, such increases are not presumed unreasonable, but will be analyzed to determine whether they are unreasonable.

This grant solicitation can be found at by searching for CFDA 93.511. Read the fact sheet.