Health Insurers to Face Scrutiny If Premiums Are Raised In 2011
Any health insurance companies that choose to raise premiums 10 percent or more in 2011 will face new regulatory scrutiny, according to an announcement made by the Obama administration on Tuesday. In an effort to show that health care reform can indeed stop rapid increases in premiums, the administration plans to adopt new rules next year that will improve federal oversight of increases–something that was previously managed exclusively by each state.
Obama Wants to Stop Unjustified Rate Increases
The new preliminary guidelines issued by the administration would require health insurance companies to post detailed justifications online when they propose a double-digit rate hike. Also in the rules, federal regulators would be able to determine whether a rate increase is reasonable under certain circumstances.
Overall, federal regulators will not have the power to block increases; this power will still remain in the states’ control. However, regulators will have the power to oversee what’s going on and give recommendations as they see fit.
Insurance Companies Believe Hikes Are Justified
Insurance companies have jumped in to oppose any form of federal oversight, noting they believe any hikes they impose–even those as high as 20 percent–are justified. They say the increases in health insurance are a direct result of the new coverage mandates found in the health overhaul that was enacted in March.
Another complaint insurers have is that the rule could end up costing them about $10 million to $15 million at first because they will have to make documentation adjustments and will lose out on increased premiums. But some think they won’t miss the money since studies show that insurance companies make so much in profits that some have been asked to issue refunds to policyholders.
The government hopes that by setting the new guidelines, consumers will benefit in a number of ways. Not only will they have a chance to see why their rates are increasing, they will have access to more affordable coverage options when shopping for health insurance.