HHS Announces First Round Of Grants To Help States Tackle ‘Unreasonable’ Insurance Premium Hikes

Noting Maine’s success in denying a 18.9% premium increase to Anthem Blue Cross and Blue Shield of Maine last year, HHS announced today that it will be freeing up $51 million in grant dollars through the health care law to help states strengthen their premium review programs and prevent insurers from dramatically increasing insurance premiums.

“These funds are the first round of grants available to states through a new $250 million program to create and strengthen insurance rate review processes. These grants will help states strengthen their oversight capabilities and will allow states that do not currently review rates to establish a rate review program,” Jay Angoff, Director of the Office of Consumer Information and Insurance Oversight said in a conference call with reporters.

Angoff said that HHS would not be requiring states to adopt a strict prior review process with the authority to deny “unreasonable” increases, but explained that states will have to “show they would expand their existing authority”:

ANGOFF: To receive a grant, a state must submit a plan as to how it will use grant funds to either develop or enhance its process of reviewing or disapproving or modifying health insurance rate review requests. States that successfully apply will receive either a $1 million grant during this first grant cycle….in order to obtain a grant a state must submit a proposal explaining how it would either strengthen its existing rate review authority or obtain authority, which it doesn’t have. The solicitation asks for specific examples for the specific things states could ask for. They could use grant funds, for example, to hire more actuaries to enhance their IT capacity, or to improve their consumer protection standards, or to require more in the way of refiling justification. So the states really have a lot of leeway as to what they will propose in order to obtain these rate review grants.

Angoff said he “assumes most states will apply” for the grants, but stressed that the decision was left to each individual state. Currently, more than 30 states have some level of authority over insurance premiums and the new health care law tasks the federal government with advising states on how to establish premium review standards.

The federal government will not have direct authority to overturn so-called “unreasonable” increases, but the law does allow the Secretary of Health and Human Services to assist states in developing a plan for denying rate hikes or preventing insurers with “unreasonable” hikes from participating in the exchanges. Insurers will be required to submit “a justification for an unreasonable premium increase” to the state insurance commission authority, who then makes the appropriate recommendations “to the State Exchange about whether particular health insurance issuers should be excluded from participation in the Exchange based on a pattern or practice of excessive or unjustified premium increases.”

HHS is currently developing firm standards and definitions for what constitutes an “unreasonable” increase, which states will have to follow in the next round of grants. “The grants that will be available in fiscal year 2010 are only the first in a 5-year grant program. HHS will take applications for a second round of state grants beginning in FY 2011 after new regulations regarding rate review take affect,” Angoff said.