The Centers for Medicare and Medicaid Services (CMS) will have stricter rules from September 1 in order to review health insurance rates for individuals and small groups.
This will be implemented in nine states to decide whether the increase in health coverage rates is reasonable.
These are states that lack the authority to adequately review rates. The remaining 41 states will conduct their own reviews. The move comes under the Affordable Care Act and will trigger much closer scrutiny of health insurance rate hikes.
"However, it will be up to the states to protect consumers when rate increases are found to be unreasonable. States need to make sure they have the tools necessary to prevent unreasonable rate increases from going into effect. Also, some states that have the authority to curb rate hikes need to act more aggressively to prevent insurers from gouging consumers," said DeAnn Friedholm, the director of Consumers Union's Health Reform Campaign.
Starting September 1, rate increases higher than 10 per cent will be reviewed by states with rate review procedures meeting certain standards and by CMS for states that do not have such standards.
CMS will conduct rate review covering both the individual and small group markets in Alabama, Arizona, Idaho, Louisiana, Missouri, Montana and Wyoming. It will conduct small-group market reviews in Pennsylvania and Virginia.
Insurers will have to submit a "justification" for an increase of 10 per cent or more to CMS and state regulators prior to implementing the rate hike. CMS will post such justifications on its website. Insurers will be required to post a justification on their websites for rate hikes that are determined to be unreasonable.
Under the Affordable Care Act, the power to deny or modify each proposed rate increase remains with the states. But not all states have the power to prevent unreasonable rate increases from going into effect or have regulators who exercise this authority.
Some state regulators closely examine proposed rate increases and insurers' justifications, but other states have little capability to do so. In most states, consumers do not receive adequate information about rate increases and are not able to participate in the review process through hearings or other public forums. Most states have received federal grant funds to improve their rate review process.