On Thursday, the U.S. Department of Health & Human Services implemented a new regulation that requires health insurers to submit rate increase requests exceeding 10 percent to federal and state authorities to determine whether the increases are "reasonable or not."
And later this month, HHS will begin publishing all double digit rate increase requests on its healthcare.gov website where insurers will need to provide a summary and explanation of the main reasons for the increases and why the increase is justified.
According to HHS officials, the new regulation is intended to bring even greater transparency to the insurance marketplace, by essentially asking health plans to lay all their cards on the table to justify their rate increases.
"Rate review will shed a bright light on the industry's behavior and drive market competition to lower costs," said Kathleen Sebelius, Secretary of Health and Human Services, in a statement announcing the new requirements.
[See also: New HHS regulation seeks to combat unreasonable premium increases]
But insurers are quick to point out, as they have for some time, that focusing on insurance rate increases does not get at the root problem of skyrocketing healthcare costs in this country.
America's Health Insurance Plans went on the offensive with the launch of the new policy, citing current economic conditions, low Medicare and Medicaid reimbursement rates and the "outdated" fee-for-service models as a few of the reasons why insurance rates continue to increase at a rapid pace. Further, AHIP pointed to data collected from 2000-2009 by CMS that it says showed insurance premiums increased during those ten years at the same rate as the rise in overall health costs.
"Premium costs are a reflection of the underlying cost of medical care in a local market," AHIP contends in its Coverage blog. "When the cost of medical care and benefits increases, a corresponding premium increase occurs."
While AHIP and the insurance lobby argue that the new policy is an unnecessary burden on insurance companies, others argue that the new regulation stops well short of what is needed to successfully regulate health insurance rates: the ability of either the federal government or state insurance regulators to reject proposed increases.
"Disclosure alone will never be enough to prevent health insurers from charging unreasonable insurance premiums," contends Carmen Balber, Washington director for Consumer Watchdog. "To protect consumers, regulators must have the power to review and reject excessive rates. Without at least the threat of enforcement, public complaints about unreasonable increases will continue to fall on deaf ears."
Such prior approval rate regulation is the law in only 30 states now and the new regulation does not allow HHS to reject any rate increases – it only requires full disclosure by insurers of how they reached their decisions to raise premiums and to publish them on both their website and on healthcare.gov.
Even in the largest state, California, insurance regulators do not have the power reject what it deems to be excessive insurance rate hikes. Just last week legislation aimed at giving prior approval power to the insurance commissioner there, stalled in the Senate – the fourth such a bill has been derailed in the largest insurance market in the country.
[See also: California bill to allow insurance commissioner to reject premium increases dies]
Simple disclosure rules aren't entirely toothless, however. While the insurance commissioner in California does not have the power to reject rate increases, a state law that took effect this year requiring independent review of rate increases has helped.
In March, Anthem Blue Cross backed off a planned rate increase of more than 16 percent for its individual policy holders in California after independent review showed discrepancies in Anthem's rate filing.
But providing consistent review of rate filings can vary widely from state to state depending on both the amount of money budgeted for rate review and having enough staff to conduct through reviews.
For this reason, HHS has also been actively providing gratns to help states bolster their ability to conduct thorough and consistent review of insurers' rate filings. Under the Affordable Care Act, HHS was provided with more than $250 million to states in order beef up their review capabilities. To date the agency has provided more than $48 million in grants to 43 states and the District of Columbia for those purposes.