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Hearing Addresses Prior Approval For Health Insurance Premiums

Wednesday, August 10, 2011

Posted by Jaimie McFarlin - The August 2nd hearing of the Senate Health committee, “Health Reform and Health Insurance Premiums: Empowering States,” addressed efforts to regulate insurance costs since the passage of the Affordable Care Act (ACA).

Starting September 1st, health insurance companies must submit for state review any increase in premiums of 10% or more in the individual and small-group markets. After one year, state-specific thresholds will be defined, depending on their health cost trends. The rule creates transparency for health insurance consumers, and gives them access to information on whether new provisions under the ACA will raise or lower health care costs. 

Chairman Tom Harkin (D-Iowa), mentioned research from the Kaiser Family Foundation that found health insurance premiums increased 131% in the last decade while medical inflation rose just 31%. Steve Larsen, a top official from the Centers for Medicare and Medicaid Services, testified that the rate review provisions of the ACA are powerful consumer protection tools. Senator Diane Feinstein (D-Calif.) opened the hearing with testimony and anecdotal evidence in support of prior approval authority granted from federal legislation. Feinstein is sponsoring legislation would create a federal fallback requiring the U.S. Department of Health & Human Services (HHS) to regulate rates in states that do not require prior approval.

Articulating her disappointment regarding this portion of the ACA, Feinstein stated, “We almost got it included in the bill. But we did not, and so since then what’s happening is these big, for-profit companies are raising rates wherever they can, sometimes once a year, sometimes twice a year and sometimes three times a year.”

Prior approval rate regulation requires insurance companies to open their books and justify the reasons behind a rate increase before it takes effect. Since federal health reform didn't require rate regulation, states must pass laws requiring insurers to get rates approved before they charge consumers. According to the White House, only 26 states and the District of Columbia have the power to reject or modify any rate increase that is excessive or unjustified.

Senator Lisa Murkowski (R-Alaska) questioned Larsen on a key issue: conflicting dates for the enactment of state legislation and the federal deadline. As the September 1st deadline approaches and some state legislatures are not in session, several states will not have legislation in place to empower state insurance regulators. State regulators without adequate policies in place will have their reviews orchestrated by the federal government.

The review of premium increases is part of the two-pronged approach of the ACA. The ACA’s second tool for decreasing the growth rate of health insurance costs is the health insurance exchanges, which was detailed in a blog post here.

The NASE will continue to bring you updates on health care reform. Be sure to explore the resources and tools in our Health Resource Center so that you can make smart decisions for your small business. You can reach out to us via Twitter or Facebook.

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