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Kathleen Sebelius has sent out an announcement discussing the $250 million PPACA provides to states to monitor and review insurance rate hikes.  It's an excellent foil to the Medical Loss Ratio requirements, as insurers now have to think twice about upping premiums to boost their profit volume. It's also the foundation and a beautiful prelude to the exchanges, where bad faith actors will be shut out of the market.

There's a really groovy widget-thingy at healthcare.gov you can play with; it's basically a timeline of when the different parts of PPACA go into effect.  Here is what it says about the oversight grant money:

The law allows states that have, or plan to implement, measures that require insurance companies to justify their premium increases to be eligible for $250 million in new grants.  Insurance companies with excessive or unjustified premium increases may not be able to participate in the new health insurance Exchanges in 2014.

And here is additional information from Sebelius' announcement this morning:

The Affordable Care Act has already begun to help states strengthen or create rate review processes.  On August 16, HHS awarded $46 million to 45 states and the District of Columbia to help them improve their oversight of proposed health insurance rate increases.

...Today’s proposed regulations will build on these efforts by requiring insurers in all states to publicly justify any unreasonable rate increases beginning in 2011. In 2011, proposed rate increases of 10 percent or higher will be publicly disclosed and thoroughly reviewed to determine if the rate increase is unreasonable.  After 2011, state-specific thresholds would be set using data and trends that better reflect cost trends particular to each state.  Insurance company’s justifications for unreasonable increases will be posted on HealthCare.gov and the insurance plan’s website.

...Under the proposed regulation, states with effective rate review systems would conduct the reviews. If a state lacks the resources or authority to do thorough actuarial reviews, HHS would conduct them.  Meanwhile, HHS will continue to make resources available to states to strengthen their rate review processes.  

In 2014, the Affordable Care Act empowers states to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance exchanges.

I especially like how 2011 will be used as a calibration point of sorts, with these reviews forming the basis for state-specific premium models and controls.  The part about HHS conducting the reviews for states that can't was also particularly delicious; it no longer matters if a state doesn't have its own insurance commissioner or other oversight.  It also complements state regulation, not supplant it, i.e., it bolsters states that don't have adequate oversight but leaves states that do alone.  But they still have to meet HHS requirements.

Originally posted to Cedwyn on Tue Dec 21, 2010 at 08:45 AM PST.

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Comment Preferences

  •  these reviews (27+ / 0-)

    should put the reins on rate hikes in the small group and individual markets, the two that need the most protection.  

    Judging from picturebooks, apparently Heaven is a partly cloudy place. - Rilo Kiley

    by Cedwyn on Tue Dec 21, 2010 at 08:45:38 AM PST

    •  This is a great development. I like the fact that (8+ / 0-)

      the review if can't be done by the State, can actually be done by HHS. Considering the fact States are in the red with their budget, this will come in handy to reassure the public that this Administration means business regarding premium increases and control.

      ...We have many more issues that bind us together than separate us!

      by ThisIsMyTime on Tue Dec 21, 2010 at 08:57:22 AM PST

      [ Parent ]

    •  This does a lot less than many here expect. (1+ / 0-)
      Recommended by:
      enhydra lutris

      The high and rapidly growing insurance premiums are dominated by health care spending which ACA does little to fix.

      With healthcare spending at about $2 trillion, and health insurance profits at about $10 billion, these profits are about 1/2 of one percent.  We can't expect this provision to do anywhere near what is necessary to reduce our 17% of GDP health care spending closer to the 10% other industrial countries spend.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Tue Dec 21, 2010 at 09:07:52 AM PST

      [ Parent ]

      •  Apart from rationing care or reducing utilization (0+ / 0-)

        there is little to nothing that can be done, with an aging population and a sluggish economy, to address skyrocketing costs.

        Our healthcare spending is rooted in a sense of entitlement and poor prevention programs.

        Until Americans have a sense that healthcare is everybody's business (i.e., we all have a stake in public health and prevention), we will continue to lag behind.

        End of life care is a huge issue that must be addressed with sober judgment and a clear head.

        Stop clapping. Stop screaming. Open your mind. Listen.

        by Benintn on Tue Dec 21, 2010 at 09:30:55 AM PST

        [ Parent ]

        •  Other countries do it oem (2+ / 0-)
          Recommended by:
          conchita, nextstep

          Refusing to forget is our first act of defiance.

          by Eric Blair on Tue Dec 21, 2010 at 09:39:59 AM PST

          [ Parent ]

        •  Two things (2+ / 0-)
          Recommended by:
          nextstep, icemilkcoffee

          A. That's not a bad thing.

          B. It's not true.

          It's not a bad thing because there is a tremendous overutilization of medical services in this country. As someone who has seen the medical system both here and in Europe, the most striking difference is the tremendous eagerness doctors in the U.S. have to either stick you into a large expensive imaging machine, or to cut you up.

          A personal anecdote: When my daughter was one year old, she fell and hit her head from a height of about two feet. She didn't black out, and after calming down she seemed perfectly fine, but as a precaution we took her to the E.R. The doctor examined her, found nothing wrong, and then suggested a cat scan, "to be on the safe side".

          Now, research shows unequivocally that if there is no outward sign of a problem, there is no benefit to a cat scan compared to close surveillance in suspected head trauma. None. So this guy wanted to spend $1000 on exposing the brain of a one-year-old to the equivalent of 100 regular x-rays for no good medical reason. Except maybe that it would generate a bunch of cool pictures of my daughter's head. The worst thing is, this episode actually occurred twice, and two different doctors made the same recommendation. We refused both times, but a less well-informed person would probably have gone along with it.

          I have several other examples like that, but the basic message I am trying to get across is that more medical care is not automatically better medical care. This is one of the main reasons that Americans pay so much for health care without having anything to show for it in terms of better health.

          Another reason is the incredibly bloated medical bureaucracy associated with processing insurance claims. This is not just on the insurance company side; doctors and hospitals have to hire loads of people to make sure they get paid for their services. All in all, there are two million people in this country whose job consists solely of trying to get someone else to pay for medical costs, eating up 25% - 30% of American health care spending.

          A third (and mostly unacknowledged) reason, is that American physicians are very well paid, so that a given medical procedure is usually much costlier here than in other developed countries. It is true that residents and doctors in rural areas are not tremendously well paid, but the average primary care physician still makes about $185k/year. Many specialists, like anesthesiologists and surgeons, typically make well over $500k/year. I am not suggesting that doctors shouldn't be well paid, but I think that even if doctors' salaries were reduced by 30% or so, it would still be quite possible to attract high quality students to medical school, and the medical profession would remain one of the best non-Wall Street related occupations in the country.

          •  Medical School is highly expensive (0+ / 0-)

            Medical School in Britain, The British Commonwealth. Asia and Europe are partially or completely subsidized. Part of the reason why doctor salaries so high in the USA is that the training is long and costly- 8-10 years, plus residency. That comes up to $200K, easily. So completely justifiable in a salary of $185K- $500K for a GP. Compare that to $50-60K, TOPS, for a medical education in Britain and a salary of about $120K-$160k for a dispensing GP or a skilled surgeon. Much lower, just as prestigious and lower costs overall.

            Address education costs and we will start to address salaries, I think.

            Why yes, I am Catholic.

            by ems97007 on Tue Dec 21, 2010 at 11:44:17 AM PST

            [ Parent ]

            •  "Hi, mom and dad" (1+ / 0-)
              Recommended by:
              ems97007

              "This is your son, the doctor. I have $200,000 in medical school debt."

              "Can you refinance your house and pay off my student loans so my schooling costs no more than a $200,000 mortgage?"

              "It would be about $15,000 a year."

              "If I work 60 hours a week, it would cost me about $5/hour to pay off my debt."

        •  Our healthcare spending is rooted (0+ / 0-)
          in the idea that profits of providers at all levels are sacrosanct. If two treatments are available, one safe, inexpensive, and effective, and another hideously expensive, with major side effects, and less effective, it is considered the prerogative of the doctor, hospital, and patient to decide to choose the more expensive one, even if the only reason the doctor is choosing it is that he owns the the lab that performs the tests and the hospital that performs the procedure, and owns stock in the drug company that manufactures the drugs.
    •  There you go again (4+ / 0-)
      Recommended by:
      Cedwyn, agent, Larsstephens, Benintn
      Hiding your tip jar under a different heading. But you can't fool ME! I found it! Tipped! (and Rec'ed)

      To be clear, it's "EClectablog", not "Electablog".
      Visit me at Eclectablog. You could even click an ad!

      by Eclectablog on Tue Dec 21, 2010 at 09:26:07 AM PST

      [ Parent ]

  •  An awful lot of Americans want to repeal (6+ / 0-)

    what they don't understand.

    Knowledge is power, and the insurance companies are putting on a full-court press, with the help of the Republican Party, to distract, distort, and deceive.

    I remember when they were interviewing my governor, Phil Bredesen, for HHS Secretary.  He's a former insurance company executive.  I am so glad they chose Sebelius - someone who stood up to the insurance behemoths in Kansas - instead of someone like Bredesen.

    Stop clapping. Stop screaming. Open your mind. Listen.

    by Benintn on Tue Dec 21, 2010 at 08:57:50 AM PST

  •  This Kaiser Family Fdn timeline is also good (6+ / 0-)

    Stop clapping. Stop screaming. Open your mind. Listen.

    by Benintn on Tue Dec 21, 2010 at 08:58:26 AM PST

  •  Know your commissioners! (8+ / 0-)

    The list of state insurance commissioners is something that every organizer and every Kossack should have ready to share at a moment's notice.

    How reform is implemented in your state is dependent, largely, on how these commissioners work for or against the public they are hired to serve and protect.

    Stop clapping. Stop screaming. Open your mind. Listen.

    by Benintn on Tue Dec 21, 2010 at 09:00:06 AM PST

  •  It's in the Administration's best interest (2+ / 0-)
    Recommended by:
    Jim P, enhydra lutris

    to make sure PPACA does this.

    Here's a paragraph from a letter received from my employer today (leaving the employer name out):

    Although healthcare coverage is one of XXX's largest expenses, we have not passed increased costs on to you over the past two years, and your health care contribution amounts have remained the same since 2008. XXX pays approximately 70% of the cost of our health care plan compared to the national average which is closer to 60%. Unfortunately, the expected increased costs resulting from the new healthcare legislation will require us to make chanes to the health coverage we offer to you and your family.

    (Bolding added by me.)

    The letter goes on to talk about how the calendar year deductible and paycheck deductions will be rising. That's not going to help win over voters for Obama or Democrats in upcoming elections.

    "Bernie Sanders is not a Democrat, yet he's a better Democrat than most Democrats." -- Markos Moulitsas http://213.251.145.96

    by Sagebrush Bob on Tue Dec 21, 2010 at 09:08:48 AM PST

  •  CA has long had its own insurance commissioner (3+ / 0-)
    Recommended by:
    PsychoSavannah, agent, icemilkcoffee

    and its own rules. Though one company's rate hikes last year were partly rolled back, most companies have had 3 straight years of rate hikes now, and, in some cases, significant rate hikes.

    I was interested to note that there is a 10% baseline threshold. Ten percent per year for 7 years pretty much doubles the original premium (rule of 72). Meanwhile, the retirement savings of our older citizens is earning about 1% per year if they are lucky.

    While I'm happy that the states get help in examining excessive rate hikes, I can't help but wonder about the ability of the insurance companies to justify them. It will be interesting to see how this all shakes out.

    BTW, which one s the "good faith" insurance company?

    That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt -

    by enhydra lutris on Tue Dec 21, 2010 at 09:25:49 AM PST

    •  Every state does. see my comment above. (3+ / 0-)
      Recommended by:
      Cedwyn, PsychoSavannah, agent

      The reason the rates are going up has little or nothing to do with the new healthcare law, and much more to do with an aging population, rising healthcare costs (largely due to medical technology and high prescription drug costs), and ongoing issues related to covering the uninsured.

      Stop clapping. Stop screaming. Open your mind. Listen.

      by Benintn on Tue Dec 21, 2010 at 09:27:41 AM PST

      [ Parent ]

      •  I don't recall saying that costs were rising (1+ / 0-)
        Recommended by:
        agent

        because of ppaca, though, now that you bring it up, it seems to me that it would have some effect on rates insofar as it is intended to have an effect on coverages. How much of an effect, I can't guess.

        That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt -

        by enhydra lutris on Tue Dec 21, 2010 at 10:02:28 AM PST

        [ Parent ]

      •  In Switzerland (0+ / 0-)

        In 2003 the Swiss health service costed almost 50 billion francs, in 2004 already more than 50 billion francs. The Federal Office for statistics reckons with 54 billion francs in 2005 and in 2006 with 56 billion francs.

        http://www.ess-europe.de/...

        The Swiss and Germans have very modest health care inflation problems.

  •  John Kasich is our next governor (1+ / 0-)
    Recommended by:
    agent

    He's already been very clear about his intentions to remove every member of state boards and commissions appointed by Dems.  He will likely install his own people at the Dept. of Insurance.

    Watch for Kasich to lead the way for GOP governors to find the most creative ways to ignore, weaken or undermine the new regulations.  You can bet the farm on it.

    I wouldn't put it past him to return the federal funds for overseeing insurance regulation.  He already gave back $400 million when he cancelled the high speed rail project.

    This is why we wanted this program regulated at the federal level.

  •  It regulates insurer margins (0+ / 0-)

    by percentage.

    If Tennessee Republican Hospital Systems wants to raise prices by 15%, then insurers have even incentive to go along with such an increase.

    The margins should have been based on fixed dollar amounts, with customer-friendly incentives and penalties.

  •  Too late to rec (0+ / 0-)

    but never too late to say great post.

    "Don't fall or we both go." Derek Hersey 1957-1993

    by ban nock on Thu Dec 30, 2010 at 04:33:12 AM PST

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