NCPA - National Center for Policy Analysis

Steep Rises in Health Premiums Scrutinized

August 31, 2011

A new federal and state program on health insurance rates will determine whether bad publicity alone is enough to stop insurers from levying steep increases, says the Wall Street Journal.

  • Starting Thursday, the Obama administration and states will automatically scrutinize any proposed health premium increase of 10 percent or more as part of the 2010 health overhaul law.
  • The change applies to an estimated 34.8 million insurance policies that Americans buy on their own or get through a small employer -- two markets where consumers have faced particularly hefty increases in recent years.

America's Health Insurance Plans, the industry's main lobbying group, found that about half of all increases in the individual-insurance market exceeded 10 percent each year for the past three years.

Before an insurer raises rates, it will now have to submit a seven-page form justifying the increase to regulators, who will determine whether the increase in rates is reasonable.

But there's a big catch.  Even if regulators find the rate increase is unjustified, the law gives them no new powers to block the insurer from charging it.  Instead, federal regulators say they are hoping that disclosure of large increases -- which will be posted on the Department of Health and Human Services' website --will be enough to discourage carriers.

  • Insurance-industry officials say the reviews amount to a shaming process and that many rate increases reflect the rise of hospitals' prices and usage rates of many medical procedures.
  • Carriers have said complying with the richer benefits called for under the health overhaul have increased their costs, yet they won't get to exempt them from rate-review calculations.
  • Some insurance regulators, including those who support the health law, say the provision has little point.

Policies offered through large employers, which generally haven't seen such sharp increases in recent years, won't be included in the review.  Small-employer policies include those with 50 or fewer workers.

Source: Janet Adamy, "Steep Rises in Health Premiums Scrutinized," Wall Street Journal, August 30, 2011.

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