Health Affairs

'Unreasonable' Health Insurance Rate Increases

Bethesda, MD -- A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation describes a new requirement for reviewing "unreasonable" health insurance rate increases. A provision of the Affordable Care Act requires such reviews for individual and small-group health insurance (typically for companies with fifty or fewer employees). The goal is to discourage insurers from inappropriately raising premiums and to make the health insurance market more consumer-friendly and transparent.

A proposed rule recently issued by Department of Health and Human Services (HHS) defined "unreasonable" as an average annual increase of 10 percent or more. HHS estimates that in 2011 more than half of the rate filings in the individual market and 20-40 percent of those in the small-group market will fall in the "unreasonable" increase category. They will be subject to review by either a state authority or HHS to determine whether the proposed increase is appropriate.

This new policy brief explains:

• What's in the law? Most states and the District of Columbia have the ability and the authority to conduct insurance rate reviews. But under the Affordable Care Act, if a state is not able to do so, HHS will conduct the review instead. If an insurance company decides to proceed with an increase that is determined to be unreasonable, it must publicly disclose the information on its website and provide a final justification to HHS. HHS will also post the results of those reviews on its website.
  
  
• What are the concerns? Comments submitted to HHS about the proposed regulation raised several issues, including when the regulations should take effect (HHS has proposed July 2011; a counterproposal is July 2012, to allow states and companies more time to comply); whether or not these provisions should also apply to large insurance groups; and the degree to which there should be full public disclosure of insurance rate justifications. HHS will respond to public comments and issue a final rule later in 2011.
  
  
• What's next? The Affordable Care Act provides $250 million in grants for states to develop or strengthen their rate review systems. It is not clear how state regulators will handle rate increase requests, since insurers have warned that without increases, many companies might go out of business or abandon some insurance markets or locations. As of 2014, states will also be able to exclude from new state health insurance exchanges any companies with a history of requesting excessive increases.

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears each month in print, with additional Web First papers published weekly at www.healthaffairs.org. You can also find the journal on Facebook and Twitter and download Narrative Matters on iTunes. Address inquiries to Sue Ducat at (301) 841-9962 or sducat@projecthope.org