The coming year will bring additional regulatory oversight and new efforts by health insurers to manage it. Health insurers will be asked to justify rate increases for individual and group policies, according to the Department of Health and Human Services. Last week HHS said it will require rate increases of 10% or more to be publicly disclosed and reviewed.

The review does not include federal authority to reject rate hikes, but in states that lack resources for “thorough actuarial reviews” the feds will intercede, said HHS. If an increase is deemed “unreasonable,” the finding will be posted publicly.

The health care overhaul, which has as its goal to provide coverage for millions of uninsured people, created a five-year, $250 million grant program to help regulators challenge “unreasonable” rate hikes.

Additionally, HHS officials said they will consider several factors to decide what constitutes “unreasonable.” They will examine whether a rate would produce a medical loss ratio, which measures the percentage of premiums spent on medical care, below 80%. They also will question whether assumptions that go into the rates are based on substantial evidence.

After 2011, the 10% increase threshold that triggers a review will be replaced by percentages that are specific to each state. By 2014, states will be able to exclude insurers that show "a pattern of excessive or unjustified" rate hikes from health insurance exchanges that will become available to consumers, HHS said.

Meanwhile, the new rule "maximizes consumer protection and transparency without unduly burdening the industry," said Jay Angoff , head of the HHS office of insurance oversight, during a teleconference with reporters.

HHS Secretary Kathleen Sebelius said consumers in individual and small group markets don't have sophisticated purchasing teams like large employers, and they don't fully understand their options.

News of the rule brought new light to a controversial report about Anthem Blue Cross raising rates as much as 39% in California; and reports say the hike helped reignite the health care overhaul legislation. The insurer later withdrew the increase, and state regulators approved an average rate increase of 14% for Anthem Blue Cross, a WellPoint Inc. subsidiary.

HHS will seek comments on the new regulation over the next few months before it becomes final.


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