Proposed rule requires health insurers to justify rate hikes

Beginning in 2011, health insurance premium increases of 10% or higher will need to be publically disclosed and submitted for formal review to determine if the increase is unreasonable, according to proposed regulations announced by the U.S. Department of Health & Human Services (HHS) on Tuesday.

“Year after year, insurance company profits soar, while Americans pay more for less health care coverage,” HHS Secretary Kathleen Sebelius, said in a press release. “The Affordable Care Act is bringing unprecedented transparency and oversight to insurance premiums to help reign in the kind of excessive and unreasonable rate increases that have made insurance unaffordable for so many families.”

Average family coverage premiums have risen 131% since 1999, according to the agency.

In August 2010, HHS allocated $46 million to 45 states and the District of Columbia to fund improvements in health insurance oversight. Under the new provision, states that have effective rate review systems in place are expected to conduct the reviews. For states that lack the necessary resources, HSS will perform the reviews.

HHS plans to establish state-specific thresholds for insurance increases as cost data and trends become available.  Additionally, states will be able to exclude health plans that have a pattern of excessive, unjustified premiums from health insurance exchanges projected to be in place after 2014.

The proposed rule is currently open to public comment and could be adopted as early as July 1, 2011.

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