Health insurers must justify their rate hikes

WASHINGTON – Health insurers will have to start publicly justifying big rate increases, according to a new requirement of the health care law implemented Thursday to put pressure on insurance companies to hold down skyrocketing premiums.

The new rules will mandate that insurers post on their websites an explanation of premium increases that exceed 10 percent. They must submit them to state and federal regulators, who will also post them later this year.

“For far too long, families and small employers have been at the mercy of insurance rate increases that often put coverage out of their reach,” Secretary of Health and Human Services Kathleen Sebelius said in a statement. “Rate review will shed a bright light on the industry’s behavior and drive market competition to lower costs.”

The rules do not give state and federal regulators new authority to block rate hikes, however, even if government officials find the increases are unjustified.

Some states already have this power, and several particularly aggressive states, such as Oregon and Rhode Island, routinely make insurers lower their rate increases after determining proposed hikes are unjustified.

Even in less activist states, some regulators have been beefing up oversight of insurance companies with the help of federal grant money made available by the health care law President Barack Obama signed last year.

But to the chagrin of consumer advocates, 30 states still do not have authority to block rate hikes in both the individual and small-group markets, according to a 2010 survey by the nonprofit Kaiser Family Foundation.

“Disclosure alone will never be enough to prevent health insurers from charging unreasonable insurance premiums. To protect consumers, regulators must have the power to review and reject excessive rates,” said Carmen Balber, Washington director for California-based Consumer Watchdog.

The insurance industry, long a powerhouse in state capitols nationwide, has vigorously fought efforts to give regulators this enhanced authority, saying it is unnecessary.

This week, an effort in California to give the state’s insurance commissioner greater authority collapsed in the statehouse.

On Thursday, America’s Health Insurance Plans, the industry’s Washington-based lobbying arm, reiterated its opposition to enhanced oversight, suggesting that the premiums are “a reflection of the underlying cost of medical care in a local market.”

The Obama administration plans to rely on state insurance regulators to scrutinize insurance rates.

But federal regulators will conduct insurance oversight in states where the administration has determined that state oversight is inadequate, including Alabama, Arizona, Louisiana, Missouri, Montana, Pennsylvania, Virginia and Wyoming.

In the future, the Obama administration plans to work with states to set individual state-by-state thresholds for rate hikes that will require public explanations from insurance companies.