Insurers will have to justify rate increases over 10 percent
by Joan McCarter
http://www.dailykos.com/story/2011/05/20/977716/-Insurers-will-have-to-justify-rate-increases-over-10-percent?via=blog_1Amid numerous reports of massive rate increases, and profits, for health insurance companies in the new Affordable Care Act universe, the Obama administration is demanding that insurers begin justifying proposed rate increases in September of this year.
Kathleen Sebelius, the secretary of health and human services, issued a final rule establishing procedures for federal and state insurance experts to scrutinize premiums. Insurers, she said, will have to justify rate increases in an environment in which they are doing well financially, with profits exceeding the expectations of many Wall Street analysts.
“Health insurance companies have recently reported some of their highest profits in years and are holding record reserves,” Ms. Sebelius said. “Insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, but many insurance companies continue to raise their rates. Often, these increases come without any explanation or justification.”
Federal health officials proposed the 10 percent threshold in December. The insurance industry criticized it as an arbitrary test that could brand a majority of rate increases as presumptively unreasonable. But the administration rejected the criticism and insisted on the 10 percent standard in the final rule, issued Thursday. Beginning in September 2012, the government will set separate thresholds for the states, depending on health care and insurance costs in those states. In the meantime, insurers will have to abide by the 10 percent threshold. Note that it doesn't mean insurers can't increase premiums above 10 percent, but that they will have to justify those increases. Insurers, of course, don't like it and say that the rule will do nothing to "address the underlying costs of health care, which they described as the main factor driving up premiums." Which does deflect from the issue of insurance company profits.
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