Why is this Topic Important to Wealth Managers? This blogticle provides an overview of a recently rule promulgation as part of the Affordable Care Act. Wealth managers providing health insurance should generally be aware of the current regulations as they apply to client planning.
Yesterday, the Department of Health and Human Services (HHS), working in partnership with the States, issued a final regulation which is designed to scrutinize large health insurance premium increases, and to provide consumers with access to clear information about those increases.
Under the final regulation:
- Starting September 1, 2011, insurers seeking rate increases of 10 percent or more for non-grandfathered plans in the individual and small group markets are required to publicly disclose the proposed increases and the justification for them. Such increases will be reviewed by either State or Federal experts to determine whether they are unreasonable.
- An easy-to-access, consumer-friendly disclosure form explaining the proposed increases will also be made publicly available through HHS, State and/or insurer websites.
- Starting September 1, 2012, the 10-percent threshold will be replaced with a State-specific threshold, using data that reflect insurance and health care cost trends particular to that State. The final rule clarifies that HHS will work with States in developing these thresholds.
- States with effective rate review systems will conduct the reviews, but if a State lacks the resources or authority to conduct actuarial reviews, HHS would conduct them. HHS expects that the vast majority of States will conduct these reviews, and will make this determination by July 1. HHS will continue to make resources available to States to strengthen their rate review processes.
Publication of the final rule under the Act was prompted in part since the rise in health insurance premium over the last decade. Since 1999, the cost of coverage for a family of four has climbed 131 percent.  Moreover the rule comes as health insurance companies have reported some of their highest profits in years.
The regulation issued today finalizes proposed rules issued in December 2010. The final rule has several additions to the proposed rule, including a requirement that states provide an opportunity for public input in the evaluation of rate increases subject to review.
The Affordable Care Act brings an unprecedented level of scrutiny to health insurance rate increases. The new rate review regulation works in conjunction with earlier rules requiring insurers to spend at least 80 percent of premium dollars on direct medical care or work to improve the quality of care for patients or provide a rebate to their enrollees. The “medical loss ratio” regulation was released on November 22, 2010. The medical loss ratio regulation is designed to ensure that premiums are being spent on health care and quality-related costs, not excessive administrative costs and executive salaries.
The New York Times reports that since “Federal officials acknowledged that they did not have the authority to block rates that were found to be unjustified” the feds provided other support in the form of $250 million. The Times reports that a few states have turned downed the funding because they are generally opposed to the federal health care law.. HHS has already awarded $44 million in Affordable Care Act in connection with state oversight capability funding.
Next week’s blogticle will present discussion on topics related to planning with life insurance.
We invite your questions and comments by posting them below, or by calling the Panel of Experts.
 The Kaiser Family Foundation and Health Research Educational Trust. “Employer Health Benefits 2010 Annual Survey”. http://ehbs.kff.org/pdf/2010/8085.pdf. Last Accessed 5/19/2011.
 See generally New York Times, “Health Insurers Making Record Profits as Many Postpone Care.” May 13, 2011.http://www.nytimes.com/2011/05/14/business/14health.html. “The nation’s major health insurers are barreling into a third year of record profits…”
 Robert Pear. “Insurers Told to Justify Rate Increases Over 10 Percent.” New York Times. Published: May 19, 2011. http://www.nytimes.com/2011/05/20/us/politics/20health.html. Last Accessed May 19, 2011.