In a new comment letter to the Department of Health and Human Services, America’s Health Insurance Plans said the 10% trigger for review of rate hike requests will unfairly establish a de facto presumption that a proposed increase is too high.
The AHIP letter argues that decisions on whether a requested rate increase is too high should be actuarially-based and solvency-based.
The AHIP letter was in response to a request for comment by HHS on its proposal that a 10% rate hike request will trigger a rate review by states and the federal agency.
The proposal is included in regulations HHS has proposed as part of its efforts to implement the new healthcare reform plan, the Patient Protection and Affordable Care Act.
“We urge reconsideration of the approach of choosing a specific numerical benchmark,” the letter states. “And [we] would suggest that the 10% threshold is not a reasonable threshold.”
The letter says that health plan solvency is threatened if healthcare costs continue to grow unabated, but actuarially justified rate increases are not allowed to go into effect.
“Such suppression of rate increases would also significantly add to premium fluctuations, creating needless volatility for consumers and new burdensome and unnecessary administrative costs,” the letter says.
The letter says that the 10% threshold is flawed on many levels as it does not capture: (1) geographical variation; (2) the multiplicity of factors that historically go into calculating rates including consideration of factors related to risk and adverse selection; (3) increases in premium due to the decreased value of cost-sharing when medical inflation increases and cost sharing remains constant; and (4) the calculation of PPACA compliance costs.
Moreover, the letter says, the 10% threshold “will have the likely result of burdening states, HHS, and health plans with a tremendous volume of fully justifiable and reasonable rates now being subject to a new and unnecessary, additional review process.”
“Politicizing the reviews…threatens to undermine the financial health and continued viability of health plans,” the letter adds.
Instead, AHIP says, the rate review examinations should be viewed in light of the regulatory scheme in PPACA, including the Medical Loss Ratio provisions that require a retrospective review of premium dollars spent and rebating if the thresholds are not met.
The letter also voices concern that through the proposed rate review process, “undue delay of rate increases determined to be reasonable through the review process will have the effect of causing higher future increases to address rate shortfalls, and potential exits from markets when companies face uncertain standards of fairness of review.”
The letter adds that AHIP “strongly supports” the decision to retain the state-based tradition of rate review, with the primary focus of responsibility at the state level.