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Health insurers face new rules over price hikes
December 21, 2010 / 2:57 PM / 7 years ago

Health insurers face new rules over price hikes

WASHINGTON (Reuters) - U.S. health insurance companies that want to increase premiums by 10 percent or more next year would face tougher government scrutiny under new rules proposed on Tuesday.

<p>Medical paperwork and forms are seen at the Discovery Communications Wellness Center at the clinic in the Discovery Communications headquarters building in Silver Spring, Maryland December 3, 2009. REUTERS/Jim Bourg</p>

The rules, called for under the sweeping healthcare law passed in March, would require insurers with price increases of 10 percent or more in 2011 to submit data justifying the higher rates for states or, in some cases, the federal government to assess.

While regulators cannot set health insurance rates, they can determine whether proposed increases are “unreasonable.”

The rules put further pressure on health insurers such as Aetna Inc, UnitedHealth Group Inc and WellPoint Inc, which suffered bad press and drew closer scrutiny by the U.S. Congress and regulators this year when prices for some individual plans in certain areas rose more than 30 percent.

Tuesday’s proposal offers Wall Street and insurers more details on the rules, which analysts said were better than expected and lifted some uncertainty hanging over the industry.

Shares of insurers, represented by the S&P Managed Health Care Index, rose 1.5 percent after the proposal was announced, but later pared their gains and were up 0.5 percent, in line with the overall market.

The rule is “not as bad as it could have been,” Capital Alpha Partners analyst Kim Monk told Reuters. With its emphasis on the states’ role, less federal oversight is likely over time and the U.S. Department of Health and Human Services (HHS) “will get out of the rate review business entirely, with this just being a stopgap.”

The proposal also pushes back implementation until July, which gives companies more time to seek possible changes, she added.

Health insurers largely fought Democrats’ healthcare overhaul but have since said they will work to implement it. Republicans, who are set to take over the U.S. House of Representatives next month, have vowed to repeal the law.

Karen Ignagni, head of the healthcare industry lobbying group America’s Health Insurance Plans, said the 10 percent threshold does not adequately account for all the factors insurers face when setting rates and that overall higher healthcare costs are a major factor.

“The public policy discussion on healthcare costs has focused on health insurance premiums while ignoring the root causes that are driving up the cost of coverage,” said Ignagni.

Jay Angoff, head of the Office of Consumer Information and Insurance Oversight at HHS, said the proposed rule “strikes the right balance” between companies and consumers as well as state and federal roles.

“We believe that it maximizes consumer protection and transparency without unduly burdening the industry,” he told a news conference.

Under the draft, healthcare insurance plans for large groups, such as those offered by many big employers, are not subject to the review.

Still, insurers would have to submit a host of data to regulators about how they set their higher prices, including a three-year history of rate increases for the specific insurance plan, details on the plan’s medical-loss-ratio spending, and data on employee and executive compensation.

The requirements are likely to add to health insurers’ paperwork burden, Monk said.

Various consumer groups applauded the proposal, which they said would help rein in skyrocketing health plan prices and give buyers better information, although some advocates said the rules could be stronger.

“No longer will the insurance industry be able to operate in a wild, wild West through unreasonable premium increases without any accountability for their actions,” Ron Pollack, executive director of Families USA, said in a statement.

After a rate review, federal officials would post the findings on the HHS website. If a rate hike was deemed too high, insurance companies would also have to post the verdict on their own websites.

States with their own health insurance review systems would evaluate companies’ rates, with HHS stepping in to assess proposed increases in states without such systems.

Different state-by-state thresholds -- rather than the blanket 10 percent one next year -- would be set after 2011, officials said.

The proposal, online at link.reuters.com/ker23r, will be finalized after a 60-day public comment period.

Reporting by Susan Heavey; Editing by Dave Zimmerman, Matthew Lewis and John Wallace

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