Update: Disclosure and Review of Unreasonable Premium Increases

Posted on June 3, 2011 | No Comments
Filed under Health Care Quality and Delivery System Reform, Health Insurance, Implementation Briefs, Implementation Update

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Key Developments

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Implementation Briefs

By Nancy Lopez

Background

An earlier Implementation Brief provided an overview of the Disclosure and Review of Unreasonable Health Insurance Premium Rate Increases, which was established by §1003 of the Affordable Care Act (ACA) by adding §2794 to the Public Health Service Act (PHSA). On May 23, 2011, the Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) published a final rule^[1] (with comment period) establishing a rate review program of “unreasonable” health insurance premium rate increases and implementing requirements for health insurance issuers regarding the disclosure and review of such unreasonable premium increases.

Unchanged from the proposed final rule,^[2] filed December 23, 2010, is HHS’s requirement that for 2011 any premium rate increase of 10% or more in the non-grandfathered individual and small insurance markets will be subject to a rate review process either by the State or HHS. As part of the review process, the proposed increase will be publicly disclosed along with the insurer’s justification for it.

Key Modifications made by the Final Rule

Definition of “individual market” and “small group market”. HHS is seeking comments and additional data on how States deal with health insurance sold through associations to better determine whether individual and small employer policies sold through associations should be included in the review process, even if the State excludes such coverage from its definition of individual and small group markets.

Effective Date. HHS moved the effective date of the rate review program from July 1, 2011, to September 1, 2011, and moved the publication of state-specific thresholds to no later than June 1 of each year for the 12-month period beginning September 1.^[3]

Premium rate increase threshold. HHS clarified the method used to calculate a rate increase (i.e., the average increase over all policies weighted by premium volume).^[4] Starting in September 2012, HHS and States will work together to establish State-specific thresholds based on state cost trends.^[5]

Submission of Justification & Disclosure to HHS. As with the proposed rule, the final rule calls for justification regarding premium increases subject to review from insurers to HHS or a State, if the State is deemed to have an effective review program. However, changes from the proposed rule include: (1) the removal of the medical loss ratio information and the requirement to report executive and employee compensation data from Part I of the preliminary justification; (2) the addition of the phrase “as determined by the Secretary” in §154.215(e) to allow the HHS Secretary discretion to make changes to what preliminary justification information is helpful based on the market and stakeholder input;^[6] and (3) the final rule allows insurers 10 business days (instead of the proposed 5 days) to respond to an HHS inquiry about incomplete Part III information.^[7]

HHS’s determination of Effective Rate Review Programs. In addition to those elements listed in the proposed rule, HHS added the two following requirements States need to meet in order to be determined by HHS as having an Effective Rate Review Program: a State must (1) provide access on a State website to Parts I and II of Preliminary Justifications for proposed increases at or above the threshold, and (2) have a mechanism for receiving public comments on the proposed rate increases.^[8]

[1] 76 Fed. Reg. 29964 (May 23, 2011).
[2] 75 Fed. Reg. 81004 (December 23, 2010).
[3] 45 C.F.R. §154.200(a) and §154.200 (b).
[4] 45 C.F.R. §154.200(c).
[5] 45 C.F.R. §154.200(a).
[6] 45 C.F.R. §154.215.
[7] 45 C.F.R. §154.215(h).
[8] 45 C.F.R. §154.301(b).

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HHS deems premium spikes unreasonable

January 12, 2012

Today, the U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced that HHS has deemed insurance premium increases in five states as "unreasonable." HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming. The excessive rate hikes would affect nearly 10,000 residents across these five states. To make these determinations, HHS used its “rate review” authority from the Affordable Care Act (ACA) to determine whether premium increases of over 10 percent are reasonable. In these five states, Trustmark has raised rates by 13 percent. HHS determined that the rate increases were unreasonable because the insurer would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.

HHS announces release of tool for small businesses to compare health insurance plans

November 18, 2011

The U.S. Department of Health and Human Services announced the release of a greatly expanded website to give small business owners a venue to review health insurance plan choices. The tool enables small business owners to compare the benefits and costs of health plans and choose those that are best for their employees. Small businesses will be able to research locally available products in an unbiased manner. The aim of the tool is to foster a more transparent and competitive marketplace. At present, the market is often difficult to analyze and small businesses do not fare as well as their large employer counterparts when negotiating health care prices. Ideally, the new tool will help ensure insurance companies will compete for business on the basis of price and quality. The tool was created under requirements contained in the Affordable Care Act (ACA). The Centers for Medicare & Medicaid Services collected information from insurers across the country to develop the site. Information on the website includes:

Insurance product choices for a given ZIP code, sorted by out-of-pocket limits, average cost per enrollee, or other factors.
A summary of cost and coverage for small group products that shows the available deductibles, range of co-pay options, included and excluded benefits, and benefits available for purchase at additional cost.
The ability to filter product selection based on whether the plans are Health Savings Account eligible, have prescription drug, mental health, or maternity coverage, or allow for domestic partner or same sex coverage.

Government tool promotes transparency regarding insurance rate increases

October 7, 2011

Since September 1, 2011, health insurance companies have been required to inform the public whenever they want to increase health insurance rates for individual or small group policies by an average of 10% or more. Insurance experts in state or federal government will then review these rate increase requests in a process known as "rate review." On Friday, the Obama administration released a Web-based tool that will allow consumers to track when health plans are considering steep premium hikes. The new tool enables insurance customers to search for potential hikes by state.

HHS issues amended final rule on rate review, association plans subject to reviews

September 6, 2011

The U.S. Department of Health and Human Services (HHS) has issued an amended final rule clarifying the definition of "individual market" and "small group market" with respect to the rate review process authorized by the Affordable Care Act (ACA). The definition now includes association plans in the types of health insurance products that are subject to the rate increase disclosure rules ad reviews, even if States do not chose to regulate association plans as part of their own individual or small group markets. For more information on the disclosure and review of insurance premiums under the ACA, click here.

CMS issues final rule on insurance rate review

May 20, 2011

The Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) have issued a final rule implementing Section 1003 of the Affordable Care Act (ACA), which governs disclosure and review of "unreasonable" health insurance premium rate increases. As with the previously-issued proposed rule, the final rule calls for justification by insurers to state or federal reviewers on any health insurance premium rate increase of 10% or more, beginning in September of 2011. After one year, in September 2012, the level triggering state or federal rate review and justification will be 10%, or at a state-determined level based on individual factors within that state.

Oliver Wyman report finds insurer fees will increase premiums

October 31, 2011

A new report commissioned by the insurance industry and authored by Oliver Wyman, "Estimated Premium Impacts of Annual Fees Assessed on Health Insurance Plans," quantifies the impact of insurer fees on private and public sector coverage. According to the report, the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) have both concluded that such fees will increase insurance premiums. The analytical data presented in the report estimates that the insurer fees will increase premiums in fully insured coverage markets by an average of 1.9% to 2.3% in 2014. This translates into a $2,800 average increase in individual coverage cost, and $6,800 for a family over a 10-year period, beginning in 2014.

New Kaiser/HRET report shows premium costs rose during 2011

September 30, 2011

In their 2011 Employer Health Benefits survey, the Kaiser Family Foundation (KFF) and the Health Research & Educational Trust (HRET) found that annual insurance premiums for family coverage were over $15,000 this year, which is up more than 9% since last year. This increase is also significant because it outpaced both general inflation and workers' wages. The survey also found that 1 in 4 workers (23%) are members of health insurance plans that changed their cost sharing requirements for preventive services as a result of the Affordable Care Act (ACA), and 31% of workers are enrolled in plans that changed the preventive services offered because of the ACA. Additionally, 2.3 million young adults have been added to their parents' insurance plans in accordance with the provision in the ACA allowing children to be covered on their parents' plans until age 26.

GAO paper recommends improved health care price transparency

September 24, 2011

Consumers are responsible for increasing proportions of their health care costs. Health care price information that is available before consumers receive care, or transparent, may help consumers anticipate such costs. In a recently released report, the U.S. Government Accountability Office (GAO) examined 1) how various factors affect the availability of health care price information for consumers and 2) the information selected public and private health care price transparency initiatives make available to consumers. GAO reviewed price transparency literature, interviewed experts, and examined eight federal, state, and private insurance company health care price transparency initiatives. The report recommends that the Department of Health and Human Services (HHS) determine the feasibility of making complete cost estimates of health care consumers available to consumers.

GAO examines rate review in states

August 3, 2011

The Government Accountability Office (GAO) has released a report that examines state oversight of the insurance rate review process. The report finds that states' rate review processes varied in both approach and result, with some states achieiving a lowering of premiums after review and other states reporting no premium reductions following review. The report also provides information on changes states have made to their review process since the passage of the Affordable Care Act (ACA). The ACA requires the Department of Health and Human Services (HHS) to provide grants that assist states with their rate review activities, as access to affordable health coverage is one of the pillars of sucessful health reform. For more information on insurance premium rate review, click here.

Disclosure and Review of Unreasonable Premium Increases

April 14, 2011

Over the past decade, health insurance premiums have doubled (with particularly sharp increases in the small group and individual markets), making insurance coverage unattainable for millions of Americans. News stories have reported that some health insurers have sought to increase premium rates as much as 50 percent.