State and federal governments are daily tightening the screws on health insurers' ability to raise premiums, focusing on state rate reviews as the primary tool for ensuring that premiums are what Steve Larsen, deputy director for oversight in HHS' Office of Consumer Information and Insurance Oversight, described as "fair and justified" during a June 9 webchat.
In New York, Gov. David Paterson signed into law legislation that restores--after a decade-long absence--the state's authority to stop health insurers from instituting what it considers to be unreasonably high rate hikes for the roughly 3 million New Yorkers who are either individual policyholders or enrolled in small-employer plans, reports the New York Times.
Effective Oct. 1, insurers will have to submit rate requests to the state Insurance Department before raising premiums. The state then will have 60 days to decide whether to approve, modify or reject the request, reports the Buffalo News. The public will be able to comment on all rate applications, and insurers will have to provide consumers with 60 days notice of any rate increases (double the current 30 days' notice). In addition, the law requires that insurers spend 82 percent of premiums on medical care for small-business and individual policyholders. Previously, the medical-loss ratio was 75 percent and 80 percent, respectively.
The new prior-approval process includes some protections for insurers. If the state fails to make a decision within 60 days, rate requests will receive automatic approvals, Mark Wagar, president of Empire BlueCross BlueShield, tells the New York Times. Also, the state will have to provide an actuarial basis for all denials.
In Pennsylvania, the nine largest health insurers have demonstrated what a news release issued by Gov. Edward Rendell called a "pattern of controversial rate increases," including some "truly exorbitant" rate hikes in excess of 50 percent. So the state Insurance Department is investigating to determine why the rate increases occurred--and the role played by the use of "questionable" health profiling tools (e.g., individualized medical questionnaires and drug profiling), or what is known as medical underwriting, reports The Morning Call. Gov. Rendell also urged the State Legislature to give the Insurance Commissioner "the authority needed to stop these rate increases, or we'll likely see a lot more disruption between now and 2014."
The news from both New York and Pennsylvania came within two days of an announcement by U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius that the federal government will make available to all 50 states and the District of Columbia $51 million ($1 million per state) in health insurance premium review grants. The new grant program will provide a total of $250 million over the next five years. No word yet from New York, but Pennsylvania will apply for a first-round grant by the July 7 deadline.
"The purpose of the grants is to enhance the resources that states have to conduct the reviews," said Larsen during the webchat. "The insurance companies have a lot of money and a lot of resources, and this really helps level the playing field and provides the states with the tools to hire outside actuaries [and] to hire other consultants." In addition, HHS will ask states that receive grants to use part of the funding to "increase the transparency--the sunlight--around these processes" by, for example, posting some rate-review documentation on state websites, he noted. HHS has yet to provide concrete information on what constitutes a justified vs. an unjustified rate increase.
To learn more:
- read this New York Times article
- read this Buffalo News article
- take a look at Sebelius' statement on the New York law
- read Gov. Rendell's announcement
- read this article from The Morning Call
- read this Associated Press article in the Philadelphia Inquirer
- read this HHS press release on the grant program
- watch a video of the HHS webchat here
- review this Indianapolis Business Journal article