States Receive Grants To Boost Regulation of Health Plan Rates

On Monday, HHS announced $46 million in grants to 45 states and Washington, D.C., to help improve and expand their ability to enforce new health insurance industry regulations included in the federal health reform law, the Los Angeles Times reports (Levey, Los Angeles Times, 8/17).

The $1 million grants are the first phase of a five-year, $250 million initiative under the overhaul to help states implement the new regulations, as well as consumer safeguards that would enable states to require pre-approval of proposed premium rates hikes (Aizenman, Washington Post, 8/16).

Reform Law's Limitations on Insurers

Over the next several months, provisions in the reform law will be implemented that would restrict or prohibit various insurance business practices. The reform law requires insurers to:

• Provide health coverage to children younger than age 19 regardless of pre-existing medical conditions;
• Allow dependents up to age 26 to remain on their parents' health policies; and
• Stop charging consumers higher copayments for preventive services, imposing lifetime limits on benefits, or denying benefits or rescinding coverage, except in cases of fraud or intentional misrepresentation (California Healthline, 8/16).

In addition, beginning in 2014, states will be authorized to sanction insurers that unreasonably raise policyholders' rates or exclude them from the subsidized health insurance markets known as exchanges, the Washington Post reports (Washington Post, 8/16).

Grant Program Details

According to the online summary of the grant program, recipients of the grant money must "require insurance companies to report more extensive information through a new, standardized process to better evaluate proposed premium increases."

In addition, the funding will help 21 states and D.C. "expand the scope of their current review, for example by reviewing and requiring pre-approval of rate increases for additional health insurance products in their state" (CQ HealthBeat, 8/16).

HHS records of the new grant applications show that other states plan to hire actuaries to scrutinize rate filings (California Healthline, 8/16).

The grants were available to all 50 states and the District of Columbia, but five states -- Alaska, Georgia, Iowa, Minnesota and Wyoming -- did not apply. On Monday, HHS Secretary Kathleen Sebelius said the agency would work with those five states to determine why they did not seek the funding (Lentz, Reuters, 8/16).

California's Plans

California plans to use its $1 million grant to improve the collection of data on proposed health insurance rate hikes. The state does not plan to require prior approval of premium increases.

The advocacy group Consumer Watchdog has criticized the state's grant application, arguing that the state's proposal would "prevent, not develop, any effective state regulation of health insurance rates" (Los Angeles Times, 8/17).