On May 19, 2011, the Secretary of Health and Human Services (HHS) issued a final regulation implementing a provision in the health reform law that required the agency to develop an annual process for reviewing “unreasonable increases in premiums for health insurance coverage.” See Section 1003 of the Patient Protection and Affordable Care Act. Under the final rule, effective September 1, 2011, insurers that seek to increase rates 10 percent or more for individual and small group plans must publicly disclose the proposed increases and the justification for them. In addition, increases of 10 percent or more are required to be reviewed by State and federal officials. Beginning September 1, 2012, the 10 percent threshold will be replaced with a state-specific threshold, using data that reflect trends in each particular state. Those state-specific thresholds will be updated on an annual basis, and the 10 percent threshold would apply if a specific threshold has not been implemented for a state.

If the state has an effective rate review system in place, then the state will conduct the rate reviews, but if HHS determines that the state does not have an effective review process, then HHS would conduct the reviews. HHS will make its determination of the effectiveness of state review processes by July 1.

The rule does not apply to large group insurance plans or to grandfathered plans that were begun prior to the effective date of the health reform legislation. The final rule seeks comments on how individual and small group coverage sold through associations should be treated in the rate review process.

A copy of the final rule is available here.