“Over the last 10 years, the cost of family health insurance has jumped an amazing 131 percent and today coverage is out of reach for millions of people and business owners,” the U.S. Department of Health & Human Services (HHS) said today. A new Regulation issued today by HHS under the Affordable Care Act, will help “bring transparency and lower costs for consumers by requiring review of large insurance rate hikes,” HHS said.
The final regulation issued by HHS today requires that, starting September 2, 2011, any premium rate increases of 10-percent or more must be reviewed by state or federal officials.
“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 in a release issued by HHS today. “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.”
Under the rule, independent experts are 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. While most states will take on this responsibility, 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.
Starting September 2012, the 10-percent threshold will be replaced by state-specific thresholds that reflect the insurance and health care cost trends in each state. The final rule clarifies that HHS will work with states in developing these thresholds.
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.
The rule 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 website as well as on the HHS Affordable Care Act website, www.healthcare.gov.
“Strong and transparent rate review processes are necessary to help bring down costs for consumers,” said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight. “Rate review will ensure that increases are based on reasonable estimates and real-time data on medical cost trends and health care utilization.”
The regulation issued today finalizes proposed rules issued in December 2010. The final rule has several additions to the proposed rule, including a requirement that states provide an opportunity for public input in the evaluation of rate increases subject to review. This will strengthen the consumer transparency aspects of the new rule, according to HHS.
HHS is also requesting comment from the public on applying the rule to individual and small group coverage sold through associations, which is sometimes exempt from state oversight.
For more information about recent trends in health insurance rates and the final rule, visit: HealthCare.gov.
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