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WASHINGTON, May 19 (Reuters) - U.S. health insurers will have to justify big premium rate hikes under new rules issued by the Department of Health and Human Services on May 19.

Starting in September insurers will have to publicly post proposed rate increases for the small group and individual markets. Any increase of 10% or more will have to undergo review by independent experts at the state or federal level, the agency said.

The rules were called for under the healthcare overhaul signed into law last year. HHS Secretary Kathleen Sebelius said they will provide greater scrutiny of health insurance premium rises at a time insurers are demanding premium increases even as they enjoy lower costs and huge profits.

"Health insurance companies have reported some of their highest profits in years and are holding record reserves," Sebelius told reporters on a conference call.

"Even though insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, insurance companies continue to raise their rates. Often these increases come without any explanation or justification," she added.

Results of reviews will be posted on the agency's Internet site and insurers will be required to post that information on their sites as well, she said.

While federal regulators cannot set health insurance rates, Sebelius said a growing number of states have this authority.

Sebelius said shining a light on rate increases can be effective in reining in big rate increases and can help consumers shop for affordable coverage.

Sebelius noted events in California last year where WellPoint's Anthem unit came under public scrutiny after it planned to increase rates as much as 39%.

Sebelius said her agency was working closely with states to undertake the review process. HHS will take over in cases where a state does not take up the responsibility.

The 10% threshold will be replaced in September 2012 by a state-specific threshold that takes into account trends in a state's healthcare market.

Steve Larsen, director of HHS's Center for Consumer Information and Insurance Oversight, said the current rule applies only to the individual and small group market but that the agency was seeking comment on applying the rules to groups that purchase coverage through associations.

(Reporting by Donna Smith, editing by Matthew Lewis)

© 2010 Thomson Reuters. Click for Restrictions

 

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