Federal officials are preparing to judge health insurance rate increases of 10% or more for excessiveness in seven states determined to have ineffective rate review processes.
The Center for Consumer Information & Insurance Oversight found rate review systems to be insufficient in Alabama, Arizona, Idaho, Louisiana, Missouri, Montana, Wyoming and four territories. Under final rate review regulations adopted under the authority of the Affordable Care Act, federal officials will conduct reviews "until those areas are able to strengthen their review processes and authorities," CCIIO, a division of the Centers for Medicare & Medicaid Services, announced. The center also announced partnerships with three states -- Iowa, Pennsylvania and Virginia -- it deemed to have a partially effective review program.
Louisiana Insurance Commissioner Jim Donelon plans to introduce legislation to establish a review structure in order to make the federal involvement unnecessary. The CCIIO designation is not a surprise, Donelon said.
"Historically, we have not had prior approval of rates at all," he said.
The rate review regulation -- finalized in May and effective Sept. 1 -- requires the use of independent experts to review proposed increases of 10% or more for most individual and small group health insurance plans. Reviews will be the job of state regulators. Federal officials gained the authority to perform rate reviews in states that lack the resources or otherwise decline to take on the responsibility. Starting September 2012, the 10% level will be replaced with thresholds that reflect state-specific insurance and health care cost trends in each state, developed with federal officials (BestWire, May 20, 2011).
The Affordable Care Act allocated $250 million for states to improve their oversight processes. So far, 43 States and the District of Columbia are using $44 million in grants.
Health insurers have criticized what they see as an assumption of blame for rising rates. The rising cost of providing medical care is the number-one reason for rate increases, they said. Insurers have also criticized the 10% threshold for considering an increase potentially excessive as arbitrary and not based on actuarial data (BestWire, May 20, 2011).
The regulation also requires insurance companies to provide easily comprehensible information to their customers about their reasons for rate increases judged to be unreasonable or excessive. They will be required to publicly justify and post online any "unreasonable" rate increases.
(By Sean P. Carr, Washington Bureau Manager: sean.carr@ambest.com)
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