HHS Pledges $46 Million to States for Health Insurance Price Monitoring

Forty-five states and the District of Columbia will each get $1 million in federal funds to monitor proposed health insurance premium hikes in their jurisdictions, and take action against unreasonable increases, the Department of Health and Human Services has announced.

HHS Secretary Kathleen Sebelius said the funding is needed because health insurance companies in many states hike premiums with little oversight, transparency, or accountability. She says premiums have doubled in the past 10 years, much faster than wages and inflation, putting health coverage out of reach for millions of Americans and business owners.

Twenty-six states and the District of Columbia now have the authority to reject proposed increases that are excessive, but many can't afford to enforce the regulations, which Sebelius said has contributed to unjustified premium hikes in some states. The Affordable Care Act provides states with $250 million in Health Insurance Premium Review Grants over five years.

Sebelius said Affordable Care Act provisions will ultimately increase competition, lower insurance overhead, and provide for risk pooling in health insurance exchanges in 2014, which should cut premiums in the individual market by 14% to 20%. “Between now and then, we will continue to work with states to ensure consumers are receiving value for their premium dollars and to avoid the kind of double-digit premium increases seen recently. The state proposals approved today demonstrate the need and desire for new resources and tools to help them protect against unjustifiable premium increases,” she said.

Earlier this year, Sebelius asked insurance companies to justify large premium increases and encouraged state and local officials to obtain stronger health insurance premium review authorities under state laws. The increased scrutiny at the state and federal level led to the withdrawal or reduction of several proposed health insurance premium increases that in some cases turned out to be based on faulty assumptions and data.

States have proposed to use this funding in a variety of ways.

• Additional Legislative Authority: 15 states and the District of Columbia want more legislative authority to review or requiring advanced approval of proposed health insurance premium increases;
• Expand the Scope of Health Insurance Premium Review: 21 states and the District of Columbia will expand the scope of their health insurance review by reviewing and requiring pre-approval of rate increases for additional health insurance products.
• Improve the Health Insurance Premium Review Process: All 46 states receiving grants will require insurance companies to provide more extensive information through a standardized process to better evaluate proposed premium increases and increase transparency.
• Make More Information Publicly Available: 42 states and the District of Columbia will increase the transparency of the health insurance premium review process and provide easy-to-understand, consumer friendly information to the public about changes to their premiums; and
• Develop and Upgrade Technology: All 46 states will streamline data sharing and put information in the hands of consumers more quickly.

“States will use these grant dollars in the way that makes the most sense for their insurance consumers,” says Jay Angoff, Director of the Office of Consumer Information and Insurance Oversight. “As we continue to implement the new health insurance reform law, we will continue to work with states to ensure they have the tools they need to ensure the stability of the marketplace, keep costs low and provide consumers with increased transparency, choice and quality they need to make the best health care decisions for their businesses and families.”

Under the Health Insurance Premium Review Grants, starting in 2011:

• HHS will review justifications for unreasonable increases in premiums and make them public;
• Insurers will be required to spend at least 80% of premium dollars on medical care services and quality-improvement activities and limit their spending on overhead, marketing, CEO salaries, and profits; and
• In 2014, states will be empowered to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance exchanges.