HHS Offers Grants to Force States to Follow Federal Rate Review Regulations

Last year, the Department of Health and Human Services (HHS) released Cycle I of a grant program designed to force states to follow a federal regulation that requires review of health insurance rate increases deemed by HHS to be unreasonable.

We reported in December, that states that accepted the next part of the grant program, Cycle II, would be forced to follow the then unpublished federal rate review regulation. Cycle I merely required states to improve their state health insurance rate review process or to institute such a process if no process existed.

45 states and the District of Columbia applied for and received funds from Cycle I of the grant program. More recently, Florida returned these funds.

Yesterday, the Department of Health and Human Services (HHS)released Cycle II of this grant program.

While states that wish to be free of federal control of their insurance rate review policies would be wise to follow Florida's lead by returning Cycle I funds, our reading of the statute and the grant applications leads us to believe that Cycle II is the key that locks states into the newly proposed regulation: "Rate Increase Disclosure and Review."1

Here's our point in making this distinction—state governors don't have to apply for this grant, even if they received funds for the Cycle I grant. They may still be able to refuse Cycle II and still not be subject to the regulation.

Some initial thoughts on the Cycle II application:

  1. The application is not valid unless the governor signs a "Letter of Support."

  2. HHS states in the application that 45 states applied for Cycle I funds (including Florida), but they fail to mention that Florida has withdrawn from the grant program returned the funds.

1 The American Legislative Exchange Council (ALEC)recently published The State Legislators guide to Repealing Obamacare. Page 14 of the guide advises states not to take any rate review grant funds.