Amping up oversight
HHS announces state grants for health plan rate review as insurers seek delay
The federal government is pushing states to ramp up their oversight of health insurers, even as health plans express displeasure with proposed rules on premium rate changes. Last week, HHS announced nearly $200 million in grants over five years available to states to enhance their premium rate review processes.
The funding, allocated in the federal health reform law, aims to help states gain better oversight of health plan rate changes affecting residents.
“We know that rate review is an extremely effective tool to help consumers,” said Steve Larsen, deputy administrator and director of the CMS’ Center for Consumer Information and Insurance Oversight, on a call with reporters.
There are four grant categories for the new funding. The first grants are three-year “baseline” grants of $3 million each. Applications are due Aug. 15. The second grants are twoyear baseline grants of $2 million, with applications due in 2012.
States can also get added funding in two areas: “workload grants” totaling $22.5 million to states with large populations and multiple insurers, and “performance incentives” totaling $27.5 million to states that have the statutory authority to approve or reject insurance rate increases.
The performance incentives aim to reward states that already have broad authority to review and reject rate increases and prod other states to consider new legislation that would grant insurance regulators this authority.
Michael Miller, policy director of Consumer Catalyst, a consumer advocacy group, said the grants will help states “to bring up the rigor of their rate review process,” especially at a time when many states are experiencing budget shortages.
“Consumers have been the victims of rate shock,” Miller said. “We’ve already seen the impact of rate review on holding down increases in some states.”
Some 43 states have some sort of rate review in place, but few states have the authority to reject health insurance rate increases outright.
Last August, HHS issued $46 million to 45 states and the District of Columbia to begin improving their rate review processes.
While the Patient Protection and Affordable Care Act does not give HHS or states the power to reject rate increases, it does provide for rate review oversight. In December, HHS issued proposed regulations on this issue (Jan. 3, p. 6).
The new oversight authority means that starting July 1, rate increases 10% or higher will automatically be subject to actuarial scrutiny. Insurers must justify and disclose these double-digit rate increases, and if states don’t have the manpower or ability to thoroughly analyze the rate hikes, HHS will conduct the review.
Starting in 2012, the trigger for a rate review will vary by state.
Insurers, in a 13-page public comment letter to HHS last week, asked to delay the July 1 deadline when rate review is slated to begin by one year. America’s Health Insurance Plans, the main lobbying group for health insurers, also objected to the 10% rate hike trigger, saying in written comments that it fails to account for geographic variations as well as the adverse selection of patients on the individual insurance market and medical inflation, among other factors.
The American Hospital Association, in its comments on the proposed rule filed last week, praised HHS for the regulations, saying they will offer greater transparency in how plans can be held accountable publicly while also establishing a federal-state collaboration.