Insurers Could Keep Reasons for Double-Digit Rate Hikes Secret Under Federal Rate Review Regulation

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Washington, DC– Health insurance companies will escape public scrutiny of double-digit rate hikes if the US Department of Health and Human Services fails to strengthen rate review disclosure forms proposed this week, said Consumer Watchdog.

A draft regulation issued by HHS requires justification and review of any health insurance rate increase of 10 percent or greater, but would allow states to keep secret many details of rate calculations. Consumer Watchdog said the new rule must require public disclosure of all the predictions and actuarial assumptions made by insurance companies to justify rate increases.

“The whole point of requiring insurers to justify rate hikes is to make them open their books and prove they need every penny of an increase, so consumers can decide for themselves if health insurance companies are ripping them off,” said Carmen Balber, Washington director for Consumer Watchdog. “The threat of public embarrassment for unreasonable rate hikes is the only tool in the federal health reform law with the potential to keep rate increases in check. That threat is empty if health insurers don’t have to disclose all the data behind double-digit rate hikes.”

Consumer Watchdog noted that the regulation does not require approval of all health insurance rates before they take effect, and urged states to enact prior approval rate regulation legislation.

“Ultimately, state regulators must have the power to modify and deny premium increases in order to prevent insurers from imposing unreasonable premium increases on consumers,” said Balber. 

Consumer Watchdog urged the regulation also be strengthened to require:

  • Consumers should have an official role in the rate review process.
  • All rate increases proposed or implemented since the federal reform law was enacted should be subject to review.

    • The regulation currently would not take effect until July 1, 2011, leaving unscrutinized the double-digit hikes imposed over the last year by insurers racing to beat stronger regulation.
  • More rate increases should be reviewed to determine if they are unreasonable.

    • Any increase that exceeds 150% of the rate of medical inflation, or from an insurer that failed to meet the required medical loss ratio, should also be reviewed. (The proposed regulation requires review only of increases of 10 percent or greater.)
  • The public rate justification must contain comprehensive information about insurer spending, including:

    • Administrative expenses like lobbying, campaign contributions, and advertising which go into the medical loss ratio calculation
    • Transfers to affiliate and parent companies that can be used to hide profits
  • Minimum standards for effective rate review should encourage the states to strengthen regulation.

Download Consumer Watchdog’s comments to HHS on the regulation.

Find the draft rate hike disclosure form released by HHS on Monday.

Download the draft rate review regulation proposed by HHS in December.

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Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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