Rule Requiring Insurers To Post Reasons for Rate Increases Takes Effect

Last week, a new rule in the federal health reform law took effect that will allow the Obama administration and states to require health insurers to justify proposed rate increases of more than 10%, the Wall Street Journal reports.

The change applies to 34.8 million individual or small-group policies (Adamy, Wall Street Journal, 8/30).

Details of the New Rule

Under the new rule, individual and small-group plans are required to post on their websites explanations of rate increases that exceed 10%.

Insurers also are required to submit the justifications to federal officials, who also will post them beginning this year (Levey, Los Angeles Times, 9/2).

However, the rule does not give federal regulators the power to block insurers from raising premiums. Instead, officials said they hope that disclosing the increases on the HHS website will be enough to discourage insurers.

Reaction

Insurers maintain that many rate increases are in response to an overall increase in hospital prices and procedures. America's Health Insurance Plans warned federal officials that "politicizing" the rate-review process would undermine health plans' financial health.

However, Sandy Praeger -- chair of the National Association of Insurance Commissioners and Kansas' insurance commissioner -- said, "I think there's some evidence that [premiums] are lower, and I think that's probably due to the pressure of knowing that there's going to be this additional scrutiny" (Wall Street Journal, 8/30).