New insurance rate regulations pending

Highly anticipated regulations defining what constitutes "unreasonable" health insurance premium increases are expected any day now that federal regulators have sent them to the Office of Management and Budget for final review.

Democrats' healthcare reform law gives the federal government greater oversight of health insurance premium increases by requiring a review and justification of steep increases. The law requires health plans to publicly justify "unreasonable" rate hikes starting with 2010 plan years, and gives states power to shut health insurers out of state health insurance exchanges starting in 2014.
 
The law requires the Department of Health and Human Services (HHS) to establish a process for reviewing unreasonable premium increases. Insurers must submit to HHS and the relevant state a justification for an unreasonable premium increase prior to its implementation, and they must post the information on their websites.
 
In August, HHS Secretary Kathleen Sebelius announced $46 million in grants to 45 states and the District of Columbia to strengthen their rate review processes. The awards were the first part of a five-year, $250 million provision to help states improve oversight of insurance rates, make rate information more public, purchase new technology and hire additional staff to review the rates.
 
Insurance departments in states including Massachusetts, California and Connecticut have already rejected a number of unreasonable premium increase requests over the past year. The industry group America's Health Insurance Plans (AHIP) said the rejections were a knee-jerk reaction to the pending regulation, arguing they were not based on actuarial review.
 
"We can have a data-driven process or a political process [for rate review]," AHIP chief executive Karen Ignagni told reporters last week.
 
A California-based public advocacy group recommended last month that an "unreasonable" premium increase should be defined as one that is more than 10 percent greater than 150 percent of the rate of medical care.