Exec Summary - Rate Oversight

Government Oversight of Health Insurance Rate Increases


Who:   Any individual or small employer (50 or fewer employees) with a fully insured health plan. 


When:   Effective January 1, 2011.  Beginning in 2014, Health & Human Services (HHS) in conjunction with the States will monitor premium increases for coverage offered through an Exchange and outside of an Exchange.


Background: On February 11. 2011, HHS announced $200 million in grants to help States develop programs to make rate increases more transparent. The funds support a State’s power to stop “unreasonable” premium increases from taking effect.  These grants follow grants of $46 million made in 2010 to 45 states and the D.C. for improving oversight of rate increases.


Approximately $50 million in additional grant funds are available in two different ways:

1. “Workload” grants totaling $22.5 million will be distributed to States with larger populations and more health insurers. 

2.      “Performance” incentives totaling $27.5 million will be awarded to States that have – or enact – the authority to approve or disapprove rate increases. 


Executive Summary:  Starting in 2011, all insurers seeking rate increases of 10 percent or more in the individual and small group market must publicly disclose the proposed increases and the justification for them.  Such increases are not presumed unreasonable, but will be analyzed to determine whether they are unreasonable.


After 2011, a state-specific threshold will be set for disclosure of rate increases, using data and trends that better reflect cost trends particular to that state. Under the regulation, states with effective systems will conduct the reviews. If a state lacks the resources or authority to do thorough actuarial reviews, HHS will conduct them. 


Whether performed by states or HHS, information and justification for increases above 10 percent will be posted on the HHS website.  The insurance plan will also have to make its justification for a rate increase available on its own website.


Action Required:  The regulation is intended to ensure that large rate increases in all states will be thoroughly reviewed by a governmental agency.  Individuals and employers receiving large rate increases may want to discuss the disclosure requirements of the rate review process with their insurer, agent, broker, or benefit consultant.


The information presented and contained within this article was submitted by Ronald E. Bachman, President and CEO of Healthcare Visions, Inc.  This information is general information only, and does not, and is not intended to constitute legal advice.  You should consult your legal advisors to determine the laws and regulations impacting your business.