Health Inc.

Feds Propose To Scrutinize Health Insurers' Big Rate Hikes

Remember last year's eye-popping premium increases proposed by health insurance giant WellPoint? The February brouhaha over the nearly 40 percent boosts WellPoint asked for in California helped push the health law over the finish line.

HHS Secretary Kathleen Sebelius will be watching health insurance rates.

HHS Secretary Kathleen Sebelius will be watching health insurance rates. Alex Wong/Getty Images hide caption

itoggle caption Alex Wong/Getty Images

Under the pressure and after conceding there were errors in its filing with state regulators, WellPoint finally got the go-ahead with a scaled-back increase.

Now, 10 months later, the same federal officials who were outraged are pushing ahead with new powers made possible by health overhaul to prevent a repeat. Health and Human Services Secretary Kathleen Sebelius unveiled proposed rules that would let the federal government help decide when and if an insurance company’s proposed premium increases are "reasonable."

Karen Ignagni, head of the trade group America's Health Insurance Plans, doesn't like the idea one bit. "The federal government is not in position to make these assessments," she said in a statement. States should be in charge of this sort of thing.

Now there are lots of caveats here. First of all, the rules (implementing a portion of the new health law, Affordable Care Act) apply only to the individual and small group markets. Second, the federal government doesn't have the authority under the law to actually disapprove any premium increase it deems "unreasonable," although many states do.

Still, said Sebelius at a news conference to unveil the proposed regulation, "ultimately, we know that the bright light of sunshine convinces more insurers to think twice and check their math before submitting large rate hikes, which means the benefits of these rules will be felt by millions of Americans."

Under the proposed rules, in 2011, insurers seeking rate increases of 10 percent or more would have to publicly disclose the size of the increase and their justification and assumptions underlying them.

Beginning in 2012, a separate threshold would be set for each state. States that have "effective" rate review mechanisms will examine proposed increases in excess of the thresholds; the federal government would perform the review functions for states without the resources or adequate authority.

The rules are still just a proposal, and they may get tinkered with a bit. But it's unlikely the administration will alter its course much.

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