HHS to Require Justification of Insurance Rate Increases

On May 19, 2011, the Department of Health and Human Services (HHS) announced that health insurance providers will need to justify rate increases of 10% or more starting September 1, 2011. The new rule will require any such increases to be reviewed by independent experts, primarily at the state level, but also at the federal level if states do not possess the resources or authority to review rates. Insurance companies will also be required to provide easy to understand information to consumers as to why their rates are going up and to post that information on the Affordable Care Act website. HHS Secretary Kathleen Sebelius said that the rule is intended to protect consumers from unjustifiable increases. Secretary Sebelius cited concerns over rate increases that have coincided with rises in both profits and levels of reserves held by insurance providers. The insurance industry, however, has criticized the 10% rule as arbitrary, and it has said that the focus on insurance premiums ignores what should be the primary concern of health care reformthe cost of the health care itself. Insurance companies maintain that such costs are the main factor driving up premiums and must be dealt with first in order to effect meaningful change in insurance rates. Starting in September 2012, the level of the rate increase threshold will be determined on a state-by-state basis, with HHS providing guidance to the individual states in determining thresholds that reflect local market trends. The HHS news release may be found here. —Christopher L. McLean