Controlling “unreasonable” premium increases – Feds issue new rules

 ”The rule requires insurance companies to provide consumers with easy to understand information about the reasons for unreasonable rate increases and post the justification for those hikes on their website as well as on the HHS Affordable Care Act website, www.healthcare.gov .”

Who but the government could write something like the above? Let’s see, the reason we are asking for an unreasonable rate increase is so that we can drive away customers, report outrageous profits and pay our executives pensions in line with government workers. That should cover it.

For now, unreasonable means anything above 10% . In typical fashion the following press release links premium increases to “highest profits in years.” The logic that one of the reasons for high profits is that medical care costs have not risen as much as projected sounds good until you think about it carefully. 2011 premiums (established in 2010 based on historical data) are designed to cover the cost of health care throughout all of 2011 and obviously we don’t know now what those costs will be. We don’t know what insurance company profits will be either at this point. Let’s say the last half of 2011 turns out to be a very bad year. When that happens 2011 premiums that were deemed unreasonable, may end up being too low or 2012 premiums will be substantially higher than “reasonable” just to make up the difference. The point is that there is a lot more to setting premiums than maximizing profits not to mention that some insurers are non-profit entities.

Perhaps I am unique or just strange, but if I received an unreasonable premium increase from my auto or home owners insurance I would shop around for a better deal. Given the elimination of virtually all underwriting for health insurance under PPACA, making changes in health insurance is just as possible. With all the regulation now in place eliminating denial of coverage, requiring who to cover and for how long and defining the coverage to be offered, the real question to be asked is why is any government agency regulating premiums. Let the efficient, customer focused insurers thrive and the others fall by the wayside. Put the customer in charge.

A lot of the things we pay for seem unreasonable, $7.99 for a hot dog at a Disney resort is fresh in my mind. Is the profit a small physician group makes unreasonable? Is the cost of a cat scan unreasonable? Press releases such as the following seem an obsession with this administration which from the start tried to focus public attention on insurance companies rather than the cost and utilization of health care. These pronouncements are not helpful, perhaps are politically motivated and certainly do not give the full story or present all the facts.

To better understand premium increases you might want to read Anatomy of  a Thirty Percent Premium Increase.   And if medical costs are expected to rise by 9% in 2011, is a 10% premium increase unreasonable? 

HHS NEWS
 
FOR IMMEDIATE RELEASE                                                               Contact:  HHS Press Office
Thursday, May 19, 2011                                                                                           
 
 
Affordable Care Act helps fight unreasonable health insurance premium increases
 
New rules bring transparency, lower costs to consumers by requiring review of large insurance rate hikes
 
Today, The Department of Health and Human Services (HHS) issued a final regulation to ensure that large health insurance premium increases will be thoroughly reviewed, and consumers will have access to clear information about those increases. Combined with other important protections from the Affordable Care Act, these new rules will help lower insurance costs by moderating premium hikes and provide consumers with greater value for their premium dollar.  In 2011, this will mean rate increases of 10-percent or more must be reviewed by state or federal officials.
 
“Effective rate review works – it does so by protecting consumers from unreasonable rate increases and bringing needed transparency to the marketplace,” said HHS Secretary Kathleen Sebelius.  “During the past year we have worked closely with states to strengthen their ability to review, revise or reject unreasonable rate hikes.  This final rule helps build on that partnership to protect consumers.”

Starting September 1, 2011, the rule requires independent experts to scrutinize any proposed increase of 10-percent for most individual and small group health insurance plans.  States will have the primary responsibility for reviewing rate increases.  While most states will take on this responsibility, HHS will serve in a backup role in states that don’t have the resources or authority to review rates. HHS has awarded $44 million in Affordable Care Act grants to states to help strengthen their oversight capabilities. An additional $200 million will continue to be available to states under the Act.

Starting September 2012, the 10-percent threshold will be replaced by state-specific thresholds that reflect the insurance and health care cost trends in each state.  The final rule clarifies that HHS will work with states in developing these thresholds. 

Publication of the final rule comes as health insurance companies have reported some of their highest profits in years.  One cause for these profits is that actual medical costs are growing more slowly than what insurance companies projected when they set their 2011 rates last year.  However, many of the rates consumers and small employers pay today don’t reflect these lower costs. 
 
The rule requires insurance companies to provide consumers with easy to understand information about the reasons for unreasonable rate increases and post the justification for those hikes on their website as well as on the HHS Affordable Care Act website, www.healthcare.gov . 
 
 “Strong and transparent rate review processes are necessary to help bring down costs for consumers,” said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight. “Rate review will ensure that increases are based on reasonable estimates and real-time data on medical cost trends and health care utilization.” 
 
The regulation issued today finalizes proposed rules issued in December 2010. The final rule has several additions to the proposed rule, including a requirement that states provide an opportunity for public input in the evaluation of rate increases subject to review.  This will strengthen the consumer transparency aspects of the new rule.  HHS is also requesting comment from the public on applying the rule to individual and small group coverage sold through associations, which is sometimes exempt from state oversight.
 
For more information about recent trends in health insurance rates and the final rule, visit: http://www.HealthCare.gov/news/factsheets/ratereview05192011a.html.
 

Related articles

• Fighting unjustified health insurance premium increases (quinnscommentary.com)
• Health insurers are making massive profits (timesunion.com)