HHS Offers States $200M to Fight 'Unreasonable' Premium Hikes

The Department of Health and Human Services said Thursday it is making available nearly $200 million in grants to help states combat "unreasonable premium increases" of 10% or more.

HHS said the new money will bolster state programs to improve transparency and thoroughness in the review process for health insurance premium rate hikes, and builds on the $46 million awarded last August to help 45 states and the District of Columbia crack down on unreasonable premium hikes. The grants will help states with new federal rules under the Affordable Care Act that proposed in December to require insurance companies to publicly justify unreasonable premium rate increases, HHS said.

"For too long, families and small business owners have struggled to pay ever increasing health insurance premiums," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, which administers the rate review grants. "The Affordable Care Act provides States new resources and tools to curb those rising costs, as well as to help make sure that consumers and businesses are getting value for their premium dollars."

Of the total funding, $149 million is available to states for baseline grants to improve transparency and effectiveness in rate hike review. Another $50 million in grant funds are available to states as either: "workload" grants totaling $22.5 million for states with larger populations and more health insurers; or "performance" incentives totaling $27.5 million for states that have – or enact – the authority to approve or disapprove rate increases.

America's Health Insurance Plans and other insurance industry advocacy groups complain that the government has focused on healthcare premium increases while ignoring the underlying costs driving the increases.

Health plan leaders polled for HealthLeaders Media's Industry Survey 2011, cited "government laws and mandates" as a top driver of healthcare costs, second only to overutilization of services.

In a letter this week to HHS, Daniel T. Durham, AHIP's executive vice president for policy and regulatory affairs, warned that "politicizing the reviews…threatens to undermine the financial health and continued viability of health plans." Durham reiterated the health plans' contention that "strong steps outside of the rate review process (emphasis theirs)are needed to address the underlying factors that are driving medical costs. The rate review process cannot serve as a substitute for meaningful health care cost containment."

"Right now, we have a patchwork of rate review rules and practices in the states. Even states that have authority to reject rate increases often lack the resources to collect sufficient data and closely analyze rate hikes," said Sondra Roberto, a staff attorney for Consumers Union. "An insurer's rate increase is always based on future projections of revenues and costs, so it is very important that these projections are analyzed to ensure that they are reasonable, fair, and based on valid data and assumptions. We hope that states receiving this funding will use it to improve data collection, standardize filing requirements, and conduct more in-depth reviews."

Roberto said states have a poor history of considering the impact of rate hikes on consumers, or of making the process open for consumer advocates. "These grants will hopefully encourage more states to open up the process to allow more public involvement and use this input to balance the hardship on consumers against the company's need for an increase," she said.