U.S. Gives States Cash to Police Health Insurance Rate Hikes

August 17, 2010

A $46 million round of grants will help U.S. states boost oversight of health insurance premium hikes and keep down costs, the U.S. Department of Health and Human Services said on Monday.

All but a few states will receive $1 million each to require stricter rules for approving rate increases and clearer rate information for consumers and to promote stronger state legislation. The grants are the first round of a five-year, $250 million program.

“Having that kind of more rigorous rate review on the ground in states around the country is just going to be a real step forward for many consumers in America,” HHS Secretary Kathleen Sebelius said on Monday.

Sebelius has already called on insurance companies to justify hikes, prompting some to withdraw or adjust rates. The Obama administration, sensitive to defending health reform ahead of the November midterm elections, has been pressuring the multibillion-dollar industry for months.

In February, Sebelius chided Anthem Blue Cross of California for rate increases as high as 39 percent. Parent company Wellpoint Inc, the largest U.S. health insurer, later acknowledged “inadvertent” errors and filed for smaller rate increases.

Industry spokesman Robert Zirkelbach, of America’s Health Insurance Plans, said the focus should be on rising medical costs, “the real driver of health insurance premiums.”

“We strongly support greater transparency so that patients know exactly what is driving up health insurance premiums,” Zirkelbach said.

States vary in their level of oversight, with some requiring companies to submit rates for prior approval and others requiring no action. Just over half of the states can now reject proposed increases that are excessive or unjustified, according to HHS.

Forty-five states and the District of Columbia will get grant funding sent out on Monday and Tuesday. Fifteen will pursue stronger legislation, and 21 will expand the scope of their current review, HHS said.

“People who live and work in the state will benefit from insurance rate review if it’s conducted with a sharp and skeptical eye,” Alan Sager, a professor of health policy and management at Boston University School of Public Health, said in an interview.

Alaska, Georgia, Iowa, Minnesota and Wyoming did not apply. Sebelius said she would work with those states to see why they did not seek funding.

“The more of that review that can be done up front on the ground, understanding the markets locally, understanding the solvency issues, which are an important part of the puzzle, the better off we are,” she said.

The measure is one of several in the healthcare law aimed at insurance companies. Provisions going into effect in 2011 mandate a review of “unreasonable” rate hikes and compliance with standards on how much of each dollar must be spent on medical costs, though final rules have not been released.

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