U.S. insurers led by WellPoint Inc. and UnitedHealth Group Inc. failed to get federal regulators to change a rule in the 2010 health-care overhaul that triggers a review of any premium increases exceeding 10 percent.
The ruling takes effect this year and adds pressure on insurers to justify price increases. The health insurance industry's Washington lobbying group, America's Health Insurance Plan, had asked the government to do away with the 10 percent rate review threshold, calling it flawed.
The rules were prompted partly by a proposal from the California subsidiary of Indianapolis-based WellPoint to raise rates as much as 39 percent in 2010. After a review by California's insurance commissioner, the underlying calculations were found to be incorrect and WellPoint cut the increase in half, according to the Department of Health and Human Services.
"Effective rate review works," said Kathleen Sebelius, the U.S. Secretary of Health and Human Services, in a statement announcing the rules. "It does so by protecting consumers from unreasonable rate increases and bringing needed transparency to the marketplace."
Insurance exchanges set up by the health-care overhaul will offer tax credits for Americans to buy private coverage by 2019. Starting this year, insurers are to provide state and federal regulators with justification for any premium increases of 10 percent or more.
Insurers are subject to the reviews starting on Sept. 1, the government said in announcing the process. In September 2012, the U.S. will set up new price thresholds for state-by- state review to replace the 10 percent benchmark.
Karen Ignagni, the America's Health Insurance Plan chief executive officer, said policymakers should focus on lowering underlying medical costs such as hospitals, doctors, technology, and drug prices.
"Health plans are doing their part to restrain health-care cost growth by partnering with providers across the country to change payment models to promote and reward safe, high-quality, cost-effective care," Ignagni said in a statement.