HHS announces $200M in state grants to fight health insurance premium hikes

The Department of Health and Human Services announced Thursday nearly $200 million in new grant funds to help states make health insurance premiums more transparent and to give states the power to stop "unreasonable premium increases."

HHS officials said this new funding opportunity builds on the $46 million HHS awarded last August to help 45 states and the District of Columbia crack down on "unreasonable" premium hikes. It also complements new HHS rules proposed last December that require insurance companies to publicly justify "unreasonable" premium rate increases. 

"For too long, families and small business owners have struggled to pay ever-increasing health insurance premiums," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight. "The Affordable Care Act provides States new resources and tools to curb those rising costs, as well as to help make sure that consumers and businesses are getting value for their premium dollars."

The funding includes $22.5 million for states with larger populations and thus more health insurers and $27.5 million for states that enact, or already have in place, the authority to approve rate increases. 

[Read how state health commissioners are caught in the middle of the ACA battle.]

Tied up in the premium rate hike issue is the new federal mandate under ACA that insurers must spend a maximum of only 20 percent in premium dollars on overhead, marketing, CEO salaries, and profits. The rest must be spent on providing medical services.

America's Health Insurance Plans' (AHIP) President and CEO Karen Ignagni has said the focus on insurance premiums has been unfair. "The public policy discussion on healthcare costs has focused on health insurance premiums, while ignoring the root causes that are driving up the cost of coverage, including soaring medical prices, new benefit mandates and changes to health plans' risk pools."

AHIP agrees, however, that states are best suited to review premiums because they have the experience,infrastructure, and local market knowledge needed to ensure that consumers are protected and health plans aresolvent, she said.

[AHIP says the medical loss ratio standard is hampering insurance plans from fighting fraud that could keep premium costs down. Read more.]