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Tuesday, August 31, 2010

New grants for rate review

Colleen Haller

Staff Writer

The Department of Health and Human Services (HHS) recently announced $46 million in grants from the new health reform law to help states review insurance companies’ proposed premium hikes. In a statement released last Monday, HHS Secretary Kathleen Sebelius explains that the grants will be used by 45 states and the District of Columbia to,

help improve the oversight of proposed health insurance premium increases, take action against insurers seeking unreasonable rate hikes, and ensure consumers receive value for their premium dollars.

Unreasonable and unwarranted premium rate increase requests have become a consistent theme throughout the insurance industry. Whether or a 56 percent proposed increase in Michigan or a 24 percent proposed increase in Connecticut (both later negotiated down by regulators through rate review processes), insurers across the country have been desperately trying to raise their premium rates and price consumers out of coverage.

In addition, the increases that insurers propose often lack reasonable justification and have more to do with increasing profits than responding to high costs. If the states mentioned above were like many states, where regulators have no authority to review and reject unreasonable rate increases, these rates would have gone through without anyone questioning whether they were reasonable. And what’s more, rates hikes like these sometimes go through even in states where regulators do have rate review authority, because many of those states don’t have the resources to successfully exercise that authority. 

But, the good news is the new health care law delivers $250 million in grants over five years to help states initiate or improve their rate review procedures. As noted in Secretary Sebelius’s press statement, the 45 states and DC have each outlined a number of strategies for using the new grant money, including pursuing legislative authority to create robust rate review programs, expanding the scope of current review processes, creating a more standardized process for insurance companies to file for rate increases, and providing consumer-friendly information to the public about rate increases. (Click here to see how each state plans to use the new funding.)

These grants will give states the financial support they need to monitor and protect consumers from unreasonable rate increases. And the best part is, this is just the beginning! Thanks to the new law, starting next year, the Secretary of HHS will be able to review and make public justifications for unreasonable rate increases—providing states with additional support in fighting against unfair rate hikes. And, insurers will be required to spend a majority (80 or 85 percent) of premium dollars on actual medical care and quality improvement efforts, instead of on profits, marketing, and overhead. In addition, once the new insurance Exchanges are up and running, states will be able to exclude plans with a history of unreasonable rate increases from participating. Insurance companies will finally have to put health care before profits.

This is the first time that the federal government and the states have worked together to actively protect consumers from unreasonable rate increases. Thanks to health reform, consumers in every state will have someone in their corner, backing them up as they fight against these and other unfair insurance practices.