Reviews of rate hikes might be extended to large groups

Federal regulators will consider applying new health insurance consumer protections that were announced Tuesday to the large group market, a Health and Human Services Department official told The Hill.

The proposed rule unveiled yesterday would require health insurers that increase premiums by more than 10 percent to publicly justify the higher rates, and it empowers HHS to impose its own review if states do not have an effective process in place.

The rule, which implements a healthcare reform law provision, applies only to insurance plans in the individual and small group market, but an HHS official said the department still might choose to apply the regulation to the large group market. If review requirements are extended to large groups, it would provide new oversight to a market that isn’t accustomed to such scrutiny.
Most states do not review rates in the large group market because individuals and small groups — lacking the bargaining power of a large pool — are more prone to major rate hikes. Most states do not review rates in the large group market, and insurers don’t typically submit proposed rate increases for this market.

The large group market includes groups with at least 50 employees, though states will be required to use 100 employees as the cut-off in 2016.

HHS specifically asked for feedback on its decision to exclude the large group market from state scrutiny. According to the proposed regulation, only 18 states have some form of rate review for the large group market.

Sandy Praeger, past president of the National Association of Insurance Commissioners, said there is less of a need for the large group market to be monitored as closely.

“The real issue is in the individual or small group,” Praeger said. “That’s where you have more rate volatility.”

A California-based consumer advocacy group said it was unsure about the decision to exclude the large group market.

“I think saying no insurer has even taken advantage of a large employer is a stretch,” said Carmen Balber of Consumer Watchdog.

Under the HHS proposal, the 10 percent threshold for rate review would end after 2011, when HHS will use state-specific benchmarks based on cost trends. 

Julian Pecquet contriubted to this report.