A health reform regulation issued by the Obama administration fails to require insurers to divulge enough information to prevent unreasonable health insurance rate increases, Consumer Watchdog says.
The U.S. Department of Health and Human Services issued the final rule May 19, which details how states and the federal government will review large health insurance premium increases. Under the new rules, state insurance departments must review rate increases of 10 percent or more this year. If states don't undertake the reviews, federal officials will step in to conduct them.
Insurers must provide consumers with easy-to-understand information about why they're increasing rates by 10 percent or more. The justifications for the rate hikes must be posted on insurers' websites as well as on the Health and Human Services Affordable Care Act site.
Starting September 2012, states will work with federal officials to set their own thresholds for reviewing health insurance rates to replace the 10 percent threshold.
How the new health reform regulations may fall short
In some states insurers will have to explain all the predictions and actuarial assumptions they make to set rates, but in many cases the new regulation lets states choose how much information from a rate filing to make public, Consumer Watchdog says.
"The health reform law relies on public disclosure of unreasonable rates to shame insurance companies into charging consumers fairer prices, but that's an empty threat if health insurers don't have to explain every assumption in the full light of day," Carmen Balber, Washington director for Consumer Watchdog, said in a press statement. "This rule doesn't go far enough to protect consumers from unreasonable rate increases."
The new federal rule does not require states to approve health insurance rates before they go into effect. Some states have passed laws giving their insurance commissioners authority to reject unreasonable rate increases. But in other states insurance departments don't have the right to reject excessive rate hikes.
"We have learned the hard way that embarrassment isn't always enough to make insurance companies do the right thing. Just last month, a California regulator found a 14 percent rate increase was unreasonable, but could do no more than 'express disappointment' that the insurance company implemented the rate," Balber said in a statement. "States must have the power to reject excessive rate increases. Otherwise, rate hike decisions will be made by insurance executives deciding that the extra profits generated by double-digit rate increases are worth a few days of bad publicity."