'Unreasonable' Rate Increase Rule Proposal Scrutinized

Expect states and the federal government to begin taking a harder look at healthcare premium rate increases as part of the Accountable Care Act.

The Department of Health and Human Services issued a proposed rule in December, which defines what the agency considers to be "unreasonable" premium increases. If approved, the rule will set in motion the annual process that states and the federal government will follow in their review of premium increase proposals for the individual and small group markets.

Now a Health Affairs policy brief takes a look at how the proposed rule is expected to work.

For now 10%, which is higher than premium cost trends have tracked in recent years, is the "unreasonable" threshold for all rate increases filed or in effect as of July 1, 2011. HHS estimates that more than 50% of the rate filings in the individual market and 20%-40% of filings in the small group market will be deemed unreasonable and subject to review by state and federal officials.

Forty-three states and the District of Columbia permit state regulatory authorities to review health insurance rates. In some states regulators can reject rate increases while in others regulators can only review the proposed increases. Missouri, Montana, and Wyoming have no requirements for rate filing information. Arizona, Alabama, Georgia and Mississippi collect the rates for information purposes only.