On top of awarding more money to improve health insurance rate reviews, the Department of Health and Human Services is making its case that increased scrutiny on rate hikes helps consumers and makes the marketplace more transparent.
The agency announced Tuesday additional grants totaling $109 million will go to 28 states and the District of Columbia to combat unreasonable rate increases. The Affordable Care Act allots $250 million to strengthen states' rate review process, and $48 million has already been awarded to 42 states.
“We’re committed to fighting unreasonable premium increases and we know rate review works,” said Secretary Sebelius. “States continue to have the primary responsibility for reviewing insurance rates and these grants give them more resources to hold insurance companies accountable.”
As of Sept. 1, insurers seeking to increase rates by 10 percent or more in the individual and small group market will have to submit a request to experts for review. They'll also have to publicly justify those increases online, and for the first time, consumers will be able to submit comments on the proposal.
[See also: Health insurer rate hike reviews begin]
States have proposed to use this round of federal money in a number of ways ranging from hiring additional staff to getting legislation introduced that will approve stronger authority.
Though states are beefing up rate reviews, not every state can give prior approval to premium increases, and no federal law has been passed to give state regulators the authority to veto requests. According to Kaiser Health News, "the District and 26 states, including Maryland and Virginia, have the authority to veto rates deemed excessive for at least some types of insurance, generally policies sold to individuals and small businesses. Seven states, including California, have the power to review rate increases in advance but not to block them."
Regulators and consumer advocates say enforcing disclosure and publicizing disappointment over a rate hike isn't enough to fully protect consumers. Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, testified last month to a Senate committee that "prior approval provides the maximum level of protection for consumers."
And when reviews went into effect this month, Consumer Watchdog, a consumer advocacy organization, argued that shaming health insurers into reducing rates won't provide the level of protection consumers need in all states. In California, for example, Anthem Blue Cross at one point announced to customers it was looking to raise rates as much as 39 percent. Despite being deemed "unreasonable" by regulators, an average 16 percent increase was eventually imposed.
"Betting affordable health coverage on a humbled insurance industry is too much wishful thinking," Consumer Watchdog says. "[The] new rules will not prevent unreasonable premium increases because they do not give insurance regulators the authority to reject increases that cannot be justified."
But HHS Secretary Kathleen Sebelius argues the competitive and transparent marketplace will deter insurers from offering expensive premiums. Insurers will become "very reluctant” to be the most expensive option when plans are compared side-by-side, Sebelius says in a Huffington Post op-ed.
HHS continues to reiterate the power of the rate review. The agency released a report Thursday detailing how states will use federal grants to improve oversight and how rate review grants have been helpful thus far.
How states will use the Cycle II grants:
- Introduce legislation: 7 States are introducing legislation to strengthen their authority to review and/or publicize proposed rate increases.
- Expand scope of rate review: 19 States and the District of Columbia are proposing to use grant funds to expand the scope of rate review, for example, by reviewing rates in new markets or by reviewing rates for new products.
- Improve rate filing requirements: All 28 States and the District of Columbia are proposing to use grant funds to improve rate filing requirements, such as requiring insurers to provide additional information on administrative costs and requiring insurers to file rate increases in a standardized format.
- Improve transparency and consumer interfaces: All 28 States and the District of Columbia are proposing to use grant funds to improve consumer interfaces, such as developing a Rate Review Home Page at the Department of Insurance Website and providing opportunities for consumers to comment on proposed rate hikes via the website.
- Hire new staff: 23 States and the District of Columbia are proposing to hire new staff during Cycle II to help review rates and protect consumers.
- Improve IT: 27 States and the District of Columbia are proposing to use grant funds to enhance IT capacity through the development of new or improved rate reporting systems designed to collect more robust rate data and allow for advanced analysis of rate filings.