Premium Rate Review


Obamacare establishes a federal premium rate review process. Under the current proposed regulation any health insurance rate increase of 10% or more for individual or small group plans is subject to review. If the federal government deems a state’s insurance rate review program to be adequate, the state will perform a review to determine if the increase is “unreasonable.” If a state has no rate review program or its program is deemed to be “inadequate,” the Department of Health and Human Services (HHS) will conduct the review instead. While some states have the power to reject insurance rate hikes, the federal government does not have this power even if it deems a rate to be “unreasonable."

Insurance companies with plans with rates deemed to be "unreasonable" will be required to post a justification for the unreasonable rate increase on their website.

Obamacare also authorizes up to $250 million dollars in grants for states. Cycle I of this program gives grants to states that improve their rate review process. Cycle II of this grant will be made available to states that cooperate in the federal “unreasonable” rate increase review process. It, however, has not been released.

HHS has indicated that it will review premium increases even in states where no process exists and even if no federal grant money has been accepted. This is contrary to the text of Obamacare which says that the Secretary shall act “in conjunction with the states.”