Rate Review Victory for Consumers, Small Businesses

New rules for health insurance rate increases took effect on September 1st. By giving consumers access to more information about why insurers are raising their rates – and whether experts deem the increases reasonable – the new rules aim to put downward pressure on health insurance premiums.

What does this mean for families and small businesses trying to navigate the confusing waters of the private insurance marketplace? Starting in September, rate increases of more than 10 percent will trigger an automatic review, and an analysis that flags increases deemed unreasonable will be publicly available and posted online.

Who does the analysis? In most states, the state department of insurance is getting help from the Department of Health & Human Services (HHS) to ratchet up its rate review activities. In a handful of states that don’t have the capacity or authority to do rate review, HHS will conduct the reviews directly. Next year, HHS will work with each state to set a state-specific threshold for the percentage increase that will trigger automatic review.

These new rate review rules don’t come as a surprise. They’ve been in the works since the passage of the health care law last year. But one thing that is a surprise – and a pleasant one – is that the rules announced last week close a big loophole that threatened to undermine effective rate review: the treatment of association health plans (AHPs).

In many states, association health plans (plans sold through associations, including trade associations, regional chambers of commerce, and so on) operate in a shadow market of sorts, outside the purview of the standards and safeguards that apply for other plans in the small group and individual markets. It appeared insurers selling AHPs might succeed in dodging the new rate review rules too, leaving them free to raise rates in AHP plans without scrutiny.

Not so fast, said HHS in its announcement on September 1st, when it declared that AHPs will have to play by the same rate review rules as plans in the small group and individual markets starting in November. That’s a win for small businesses and individuals who purchase coverage through associations, and it’s a win for anyone who cares about bringing transparency, accountability, and a level playing field to health insurance rates.

The rate review rules aren’t perfect. They don’t give states new prior approval powers that are needed to truly hold insurers accountable (prior approval is the ability to approve, modify, or deny rate increase proposals). Some states have that prior approval authority already. Others, if they’re serious about providing real oversight of insurance rate hikes and real protection for small group and individual customers, will have to seek that authority through their legislatures.

But the new standards, and especially the commitment that all plans, including association health plans, will have to play by the same rate review rules, are a step towards transparency and accountability, a much-needed step in the right direction.

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