Feds mark $51 million to help states regulate insurers

The federal government has freed up $51 million in grant money for states wishing to bolster their ability to regulate insurance industry price hikes.

The move comes after some of the nation's largest health insurers said they planned to increase rates by up to 40% this year in an effort to help defray rising healthcare costs.

All states and the District of Columbia are eligible for the grants, but must first submit to HHS a proposal on how they will use the money either to strengthen an existing oversight program or create one anew.

“We assume most states will apply,” said Jay Angoff, director of the Office of Consumer Information and Insurance Oversight at HHS, on a conference call with reporters.

The massive reform law allots $250 million to qualified states, which HHS expects to divvy up over five years. States will get $1 million during this first round of proposals. Between 20 and 30 states already have the power to approve how much an insurance company can increase its rates, said Steve Larsen, deputy director of the Office of Consumer Information and Insurance Oversight.

In May, HHS Secretary Kathleen Sebelius sent a letter to state officials asking them to review their authority to better rein in insurance sector hikes before they take effect.

The reform package contains a number of provisions to tighten HHS' and the states' oversight of insurance companies, including a measure that dictates what percentage of premiums must go for medical care and another that requires companies to justify “unreasonable” increases.

But HHS has yet to define what is reasonable. In Maine, for instance, state regulators helped cut a proposed 18% rate hike down to 10%. Angoff said the agency is still discussing the issue. “This is something that will be addressed through the regulatory process,” he said.