Insurance companies need to prove rate hikes are justified

Earlier this month, the Centers for Medicare and Medicaid Services (CMS) released proposed consumer disclosure notices that insurers would be required to complete electronically when they request rate increases of more than 10 percent. These notices are the result of a provision that is one of many in the health care law that finally holds insurance companies accountable for their actions. Not only will consumers know about impending premium increases (of more than 10 percent), but they will also be given the reasons why the increase is happening.

The notice requirements apply to new insurance plans—that is plans that individuals or small groups enrolled in after March 23, 2010.

According to Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight:

The information reported by insurers would provide an unprecedented level of transparency in the health insurance market, promoting competition, encouraging insurers to do more to control health care costs, and discouraging insurers from charging rates that are unreasonable.

These proposed notices are related to the premium rate review regulation, issued in December 2010 by the U.S. Department of Health and Human Services (HHS), which established rules for the disclosure and review of unreasonable premium increases in each state. The notices would apply to those enrolled in new insurance plans after March 23, 2010 in the individual and small group markets. Rate review could begin as early as July 2011, and once rates begin to be reviewed, HHS will work to post proposed rate increases as quickly as possible on the Department of Health and Human Services’ website, www.hhs.gov.

When consumers are able to see what decisions their insurers are making about costs and why, they have more power to make well-informed choices regarding their health care. And holding these insurers accountable for their decisions will force them to provide a higher-quality product.