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“BenefitsLink continues to be the most valuable resource we have at the firm.”

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Guest Article

(From the May 31, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Health Insurance Premium Increase "Review Process" Is Effective September 1

The Department of Health and Human Services (DHHS) released its final regulations establishing a process for the review of potentially "unreasonable" premium increases for health insurance coverage offered in the individual and small group markets, as required under the Patient Protection and Affordable Care Act. The final rule is essentially unchanged from the earlier proposed version, although the effective date for the review process is moved from July 1, 2011 to September 1, 2011. Comments are specifically requested on whether and how the process should apply to insurance sold through associations and group trusts.

The review process requires that rate increases in the individual and small group market be reviewed for "unreasonableness" if they equal or exceed state-specific thresholds that will be set annually by the DHHS. The final rule reaffirms that, unless another limit is set by the DHHS, a 10 percent threshold will apply. Rate increases that meet or exceed the applicable threshold must be reviewed to determine whether the increase is unreasonable. If not subject to an approved state review program (i.e., a state "effective rate review program"), the increase will be reviewed by the Centers for Medicare & Medicaid Services (CMS). The review process will apply to changes in rates on or after September 1, 2011.

In addition to delaying the effective date of the review process, the final regulations:

Acknowledge concerns about insurance products sold to individuals and small employers through associations and group trusts that are not subject to review by the states or CMS. Comments are specifically requested on whether the policies sold by such entities should be subject to the review process.
Explain that the September 1, 2011 effective date is intended to ensure that proposed 2012 rate increases of 10 percent or more will be reviewed by either CMS or the applicable state.
State that, beginning in 2012, DHHS will publish a notice by June 1 updating the state specific thresholds for the following calendar year.
Clarify how rate increases should be calculated and how the weighting concept should work.
Remove from public disclosure the issuer's data on the medical loss ratio and executive compensation.
Extend the deadline for responding to an inquiry from CMS regarding an incomplete preliminary justification from 5 to 10 business days.
Reject a request for safe harbors or expedited rate review procedures.
State that CMS will notify the states by July 1, 2011 regarding whether they have an "effective rate review program" to which CMS will defer.
Now provide that CMS and state "effective rate review programs" will review the same basic information regarding the issuer's preliminary justification for the rate increase.
Require a state "effective rate review program" to have a mechanism for receiving public comments on proposed rate increases.
Clarify that, in reviewing rates, CMS will consider whether the product will be reasonably likely to satisfy Federal medical loss ratio standards on a projected basis.
Delete the mandated review of the issuer's risk-based capital information, and replace it with a review of the issuer's capital and surplus information.

Comments on the final rule are requested by July 18, 2011.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact:

Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955.

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.