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Big Jumps In Health Premiums Will Soon Face Government Review

Partner content from Kaiser Health News

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The Obama administration has lobbed another round in its battle with health insurers over premiums.

Insurers seeking rate increases of 10 percent or more will face increased government scrutiny starting in September under rules finalized Thursday.

States — or in some cases the federal government — will review the premium increases that cross that threshold, and insurers will have to justify increases deemed unreasonable. The law doesn't give the federal government power to reject increases, but many state regulators have that authority.

The rules, required by the federal health care law enacted last year, also require insurers to provide a broad overview of what they plan to do with money. How much will they spend on medical services and administration and how much will be reaped as profits. That last bit is a real sore point with the administration.

"Recently, insurers have posted some of their highest profits in years ... and (yet) they continue to raise rates, often without any explanation or justification," Health and Human Services Secretary Kathleen Sebelius said in a conference call with reporters.

The rules are nearly identical to the proposal issued by HHS in December. Such increases have come even as many insurers have seen their costs slow, and profits go up, as economically-strapped consumers cut back on medical care.

Insurers again criticized the rules.

"Focusing on health insurance premiums while ignoring underlying medical cost drivers will not make health care coverage more affordable for families and employers," said Karen Ignagni, head of the trade group America's Health Insurance Plans, in a written statement. She said new benefits required under the health law and young people dropping coverage are driving costs — and rates — up.

Consumer groups were generally supportive of the rules, with Ethan Rome of the left-leaning Health Care for America Now saying they put insurers on notice that "unjustified, double-digit premium rate increases will not be tolerated."

Only insurance policies sold to individuals and small businesses — not those offered to large employers — are affected by the new rules. Administration officials said they are considering whether the rules should be expanded to include plans that are sold to individuals and small businesses through associations, like groups of self-employed people.

Timothy Jost, a professor at Washington and Lee University School of Law, said he is disappointed that the rules do not include association health plans.

"That's a huge loophole and an easy way for health plans to avoid scrutiny," said Jost.

In the past year, some insurers in California withdrew double-digit increases after regulators found mathematical errors in the companies' calculations. But another insurer, Anthem, this month moved ahead with increases of up to 16 percent, even after the increase was deemed unreasonable. Regulators there don't have authority to reject increases, but are seeking legislative authority to do so.

If a state can't do an effective review, HHS would do it for them.

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