Filed Under:Health Insurance, Individual Health

PPACA: Rules Could Trigger 773 Rate Reviews per Year

Proposed federal health insurance rate review regulations could lead to reviews of about 40% of the increase requests in the small group market and 60% of the requests in the individual market.

Officials at the U.S. Department of Health and Human Services (HHS) have given those estimates in a discussion of the possible impact of a proposed rate increase disclosure and review rule.

The proposed rate review rule, which was released earlier this week, would implement PPACA provisions in the Affordable Care Act that would require the federal government to work with states to promote vigorous health insurance rate review programs.

The Affordable Care Act is the legislative package that includes the Patient Protection and Affordable Care Act (PPACA).

HHS officials are proposing that state or federal regulators should review requests for rate hikes greater than 10% for non-grandfathered individual and small group coverage, and they have suggested that regulators could end up adding reviews of requests for large-group rate hikes.

The HHS officials who conducted the impact analysis used data from the System for Electronic Rate and Form Filing, a service provided by the National Association of Insurance Commissioners, Kansas City, Mo., to come up with an estimate that carriers will file a total of 3,635 to 4,015 individual and small group rate filings this year.

Rate justification requirements could increase the number of individual and small group filings to 4,858 to 5,828 in 2011, officials say.

About 33% to 60% of the individual policies and 58% to 80% of the small group policies probably will grandfathered, but, if recent trends continue, the number of non-grandfathered filings seeking rate hikes greater than 10% could range from 221 to 650 in the individual market and from 150 to 746 in the small-group market, officials say.

The total number of filings subject to review could range from 371 to 1,396, with a mid-range value of 773, officials report.

If that mid-range figure is correct, the total insurer startup-year cost of reporting rate data to regulators, keeping relevant records, and posting rate hike request information on the Web could be about $14 million, or about $18,000 per report and $34,000 per issuer, officials estimate.

Officials are estimating each report would take 125 to 175 hours to complete, at a cost of about $200 per hour. HHS officials say hourly rates seem to range from

$80 to $120 for actuaries' administrative support staffers; $120 to $180 for actuarial analysts; $200 to $275 for support actuaries; and $340 to $360 for principal actuaries.

Once the rate review system was up and running, total insurer annual costs could be $400,000 to $4.5 million, officials say.

The Council for Affordable Health Insurance (CAHI), Alexandria, Va., a group that opposes government efforts to increase control over the health insurance market, says HHS officials seem to be ignoring the impact of the rate review requirement and other Affordable Care Act mandates on insurers' ability and willingness to provide coverage.

Given the effects of all of the new mandates on coverage costs, "setting arbitrary rate limits will threaten the availability of health insurance," CAHI says.

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