States will receive $46 million in federal funds for use in providing rate reviews and approvals for rate increases.

All but a few states will receive $1 million each to require stricter rules for approving rate increases and clearer rate information for consumers and to promote stronger state legislation. The grants are the first round of a five-year, $250 million program, notes a Reuters report.

U.S. Department of Health and Human Services’ Secretary Kathleen Sebelius said, “Having that kind of more rigorous rate review on the ground in states around the country is just going to be a real step forward for many consumers in America.”

Insurers have already been asked to justify hikes, prompting some to withdraw or adjust rates, notes the report. The Obama administration, sensitive to defending health reform ahead of the November midterm elections, has been pressuring the multibillion-dollar industry for months.
In February, Sebelius rebuked Anthem Blue Cross of California for rate increases as high as 39%. The insurer’s parent company, Wellpoint Inc., later acknowledged “inadvertent” errors and filed for smaller rate increases.

Industry spokesman Robert Zirkelbach, of America's Health Insurance Plans, said the focus should be on rising medical costs, “the real driver of health insurance premiums.” “We strongly support greater transparency so that patients know exactly what is driving up health insurance premiums,” Zirkelbach said.

States vary in their level of oversight, with some requiring insurers to submit rates for prior approval and others requiring no action. Just over half of the states can now reject proposed increases that are excessive or unjustified, according to HHS. Forty-five states and the District of Columbia will get grant funding sent out on Monday and Tuesday. Fifteen will pursue stronger legislation, and 21 will expand the scope of their current review, HHS said.

The Illinois Department of Insurance announced today that it will receive $1 million in federal funds to support its efforts to “enhance the collection, public disclosure and analysis of health insurer premium increases in Illinois.” The federal grant will supplement existing Illinois Department efforts to examine premium increases, such as the Individual Major Medical Health Insurance Policy Rate Filing Report. The 2009 report highlights premium increases imposed by Illinois health insurers for individual and family health insurance policies dating to 2005. Unlike most states, including neighboring Indiana and Iowa, Illinois law does not afford employers and families protections from premium increases far in excess both national averages and rates of medical inflation.
 
Alaska, Georgia, Iowa, Minnesota and Wyoming did not apply. Sebelius said she would work with those states to see why they did not seek funding.
“The more of that review that can be done up front on the ground, understanding the markets locally, understanding the solvency issues, which are an important part of the puzzle, the better off we are,” Sebelius said.

The measure is one of several in the healthcare law aimed at insurers. Provisions going into effect in 2011 mandate a review of “unreasonable” rate hikes and compliance with standards on how much of each dollar must be spent on medical costs, though final rules have not been released.

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