Healthcare Reform Rule Bans Unreasonable Premium Increases

In May, the Department of Health and Human Services (HHS) issued a final regulation to ensure that large health insurance premium increases will be thoroughly reviewed and consumers will have access to clear information about those increases. Effective Sept. 1, the rule requires independent experts to scrutinize any proposed increase of 10 percent or more for most individual and small group health insurance plans. States will have the primary responsibility for reviewing rate increases, and HHS will serve in a backup role in states that don’t have the resources or authority to review rates. 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.

The final regulation also requires that as of September 2012, the 10 percent threshold will be replaced by state-specific thresholds that reflect the insurance and healthcare cost trends in each state. HHS will work with states to develop those thresholds. The rule also 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 websites, as well as on the HHS Affordable Care Act website (www.healthcare.gov).

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.

“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.”