WASHINGTON – Moving to restrain skyrocketing health insurance premiums, the Obama administration is proposing new rules requiring insurers to justify increases of more than 10 percent a year in 2011.
At the same time, administration officials are planning to step up federal review of premiums if state regulators cannot adequately protect consumers, a move cheered by many leading consumer advocates.
“Ultimately, we know that the bright light of sunshine convinces more insurers to think twice and check their math before submitting large rate hikes,” Secretary of Health and Human Services Kathleen Sebelius said Tuesday announcing the proposed regulation, authorized by the new health care law. “This is our latest step to put consumers back in charge of their own health care.”
The increased oversight comes as consumers nationwide struggle with rate hikes that have exceeded 30 percent in some places, even as insurance industry profits have swelled.
In the lead-up to passage of the new law, the soaring rates fueled calls to give state and federal regulators more power to scrutinize premiums and even deny increases that appear unjustified. Only some states currently have such authority.
The draft regulations unveiled Tuesday would not give state or federal officials the ability to deny rate hikes. Instead, the administration is relying on state regulators to scrutinize proposed rate increases and to assess if they are justified by increases in the cost of care or other factors.
Insurance companies have said their headline-grabbing rate increases are being driven by the rising cost of health care.
Insurers have fiercely resisted increase scrutiny of their rate setting at the state and federal level.
Consumer groups, in contrast, largely applauded the additional oversight, which Families USA executive director Ron Pollack called “a very helpful and reasonable first step,” to reining in rates.
Under the new health care law, states retain primary responsibility for policing the insurance industry. The federal Department of Health and Human Services has made grants to 46 states to help them increase oversight.
If states do not have the capacity to review rates, however, the federal department would step in to conduct the review under the proposed new rules.
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