Consumer Advocacy Group Urges Tougher Insurance Rate Review

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A California-based consumer advocacy group said Tuesday that federal regulations on health insurance rates should be "strengthened" to "prevent insurers from imposing unreasonable premium increases on consumers."

The regulations implement a provision of Democrats' healthcare reform that requires health plans to justify "unreasonable" rate increases. Proposed regulations unveiled Tuesday define as unreasonable annual hikes of 10 percent or more, and set up a mechanism for federal regulators to take over the review process if states fall down on the job.

That proposal doesn't go far enough, said Carmen Balber of Consumer Watchdog, and states should pass legislation enabling them to modify or deny rates deemed excessive. In Congress, Sen. Dianne Feinstein (D-Calif.) introduced legislation earlier this year that would give federal regulators the power to reject "unreasonable" rate hikes, but her bill went nowhere.

Tuesday's regulations give regulators a "bully pulpit" to shame insurers into offering lower rates, Balber said, but "at the end of the day consumers will not be protected unless regulators also have the authority to reject unreasonable rates."

For its part, the insurance industry group America's Health Insurance Plans criticized the proposal, in particular the power it grants federal authorities if states are deemed to be too lax. "The federal government is not in position to make these assessments," AHIP President and CEO Karen Ignagni said in a statement.

"While the proposed rule gives consideration to the impact of rising medical costs, it also establishes a threshold for review that is incomplete because it does not adequately factor in all of the components that determine premiums, including the cost of new benefit mandates and the impact of younger and healthier people dropping coverage," she added. "Premium review must consider the unique circumstances of small employers that are struggling to afford coverage for their employees, and of the individual market in which people move in and out of coverage depending on whether they anticipate needing medical services."

Consumer Watchdog also raised issue with the limited scope of the review process. The proposed regulations are partly modeled after a template from the National Association of Insurance Commissioners that lays out several levels of disclosure; while insurers would have to publicly justify some of the reasons for their rate increase, detailed actuarial data — the numbers that back up their request — would only be shared with federal regulators in instances where HHS would take over review from the states.

"This is a huge problem, because some states consider much of this information to be confidential," Balber told The Hill. "That's a huge hole in disclosure section."

Consumer Watchdog also called on HHS to retroactively apply the new regulation to plan years approved since the law went into effect, on March 23, 2010. The proposed regulations, which will be open to debate for 60 days, call for the new review process to kick in for plan years starting July 1, 2011.

Finally, Balber told The Hill that her group is unsure whether it approves of HHS's decision to apply the proposed regulation to individual and small-group plans, but not to large group policies. The thinking is that large group plans have more bargaining power and see less drastic rate hikes.

"That said," Balber said, "I think saying no insurer has ever taken advantage of a large employer is a stretch."

Other liberal groups offered unmitigated praise for the proposed regulation.

"The days of insurance companies running roughshod over consumers and jacking up our rates whenever they want are over," Health Care for America Now's Ethan Rome said in a statement. "The new rate review rules represent a key step toward finally ending the insurance companies' stranglehold on our healthcare."

And Ron Pollack, executive director of Families USA, said that henceforth, "before deciding whether a high premium increase will be approved, states and consumers will now have the information they need to challenge the increase and hold insurance companies accountable for unreasonable consumer premium price gouging."

However, the group does intend to offer suggestions for strengthening the regulation.

"Families USA will be submitting comments to HHS on the proposed rules," Pollack said in a statement, "working to ensure that consumers can weigh in on proposed increases, that the lowest possible threshold of increases will require review and justification, and that all review processes are strong."

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