Final Federal Rate Review Regulation Released

The federal Department of Health and Human Services (HHS) released its final rule on the PPACA rate review provisions last Thursday. Under the new requirements, in addition to normal state rate review provisions, HHS will review all rate increases that exceed 10 percent. If HHS finds that an increase to be unreasonable, they will require the companies to disclose and justify the rate increases publicly.

The rule, which was originally scheduled to take effect in July, will be effective September 2, 2011. One of the major concerns NAHU has with the new regulation is that it does not address in any way the true reason why health insurance premiums continue to rise—the skyrocketing cost of medical care.

The 10 percent standard, which has been criticized by many as arbitrary, will apply for 2011-2012. After that, HHS will transition to state-based benchmarks. HHS does not have the authority to block a rate increase, but believes that the fact that there will be an additional federal review and also the increased required transparency for higher increases will have an impact on holding down rates. One means of recourse they do have against a carrier they deem to have a history of excessive rate increases would be to bar them from participating in the exchanges in 2014.

The majority of states already review proposed health insurance rates, and some require prior approval before they can be issued to consumers. PPACA does not require state review of rates, but HHS has awarded $44 million in grants to help states improve their rate review processes and has plans to award another $200 million over the next three years.

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