HHS hopes to pressure insurers into lowering rate hikes

Health insurers seeking to raise premium rates by 10 percent or more will face increased scrutiny under a final rule released by the Department of Health and Human Services. The rule attempts to pressure insurers to drop plans for major increases and make the rate-setting process more transparent, reports The Hilll’s Healthwatch.

Starting Sept. 1, independent experts must examine any proposed increase of 10 percent or more for most individual and small group plans, with states bearing most of the rate review responsibility, according to the Wall Street Journal. States with "effective" rate review systems, which are capable of collecting data sufficient to determine whether a rate increase is unreasonable and allow for public comment, will perform their own reviews. If a state can't do an effective review, HHS would do it for them, Kaiser Health News reports.

That threshold will be replaced in 2012 by state-specific levels that reflect health insurance cost trends in those areas. HHS said it will work with the states in developing those thresholds, the WSJ notes.

HHS officials, however, were careful to point out that the 10 percent increase only triggers disclosure requirements--it doesn't automatically render the rate hike unreasonable, notes PBS Newshour.

Although the rule doesn't grant states or the federal government the power to reject a health plan's rate hike, Steve Larsen, director of HHS' Center for Consumer Information and Insurance Oversight, said that publicizing a high rate increases may be enough of a deterrent for an insurance company to avoid proposing double-digit increases in premiums or to withdraw such a proposal, according to MedPage Today. "A state doesn't need to specifically turn a rate down in order to raise questions about an increase and have a back-and-forth with an insurance company about how they came to their numbers," Larsen said.

The rule also forces insurers to explain the reasons behind any double-digit hikes and show their work on the federal government's website, as well as their own. Health plans also must provide a broad overview of what they plan to spend the money on, including how much would go to medical services, profits and administrative costs, according to the New York Times Prescriptions blog.

To learn more:
- read the HHS rate review rule (.pdf)
- see the Wall Street Journal article
- read the PBS Newshour story
- check out the New York Times Prescriptions blog
- see the MedPage Today article
- read the Kaiser Health News piece 
- here's The Hill's Healthwatch blog post