Beginning this summer, health insurers seeking drastic rate increases will finally have to reveal why the increases are needed, under new rules proposed by the Obama administration.
Under the Obama proposal, insurers with rate increases in excess of 10% will have to detail why the increase is needed.
The new regs would affect insurance rate increases that take effect after July 11, 2011 for policies sold in the individual and small group markets.
States — or in some cases, the feds — will review any flagged increases to determine if they are unreasonable.
Public humiliation
However, if rate increases are deemed unreasonable, the federal government will not have the authority to reject the increases. Instead, the goal is to shame insurers who impose unreasonable rate hikes by disclosing them publicly.
Federal officials hope the public scrutiny will discourage insurers from raising rates unnecessarily.
In instances when rate hikes are deemed unnecessarily high, state regulators will be encouraged to help individuals and businesses choose health plans that offer them the most value.
And once the state insurance exchanges are up and running (they are set to open in 2014), states will be allowed to bar insurers with unreasonable rate increases from selling their plans in new marketplaces.
The feds have already given $46 million to 45 states and the District of Columbia to help them improve their oversight of proposed health insurance rate increases.
That’s a portion of the $250 million promised to states in the health reform law to help them take action against insurers seeking unreasonable rate hikes.
