Title 45—Public Welfare--Volume 1
PART 154—HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND REVIEW REQUIREMENTS
§ 154.101   Basis and scope.
(a) Basis. This part implements section 2794 of the Public Health Service (PHS) Act.
(b) Scope. This part establishes the requirements for health insurance issuers offering health insurance coverage in the small group or individual markets to report information concerning unreasonable rate increases to the Centers for Medicare & Medicaid Services (CMS). This part further establishes the process by which it will be determined whether the rate increases are unreasonable rate increases as defined in this part.
§ 154.102   Definitions.
As used in this part:
CMS means the Centers for Medicare & Medicaid Services.
Effective Rate Review Program means a State program that CMS has determined meets the requirements set forth in § 154.301(a) and (b) for the relevant market segment in the State.
Federal medical loss ratio standard means the applicable medical loss ratio standard for the State and market segment involved, determined under subpart B of 45 CFR part 158.
Health insurance coverage has the meaning given the term in section 2791(b)(1) of the PHS Act.
Health insurance issuer has the meaning given the term in section 2791(b)(2) of the PHS Act.
Individual market has the meaning given the term in § 144.103 of this subchapter.
Plan has the meaning given the term in § 144.103 of this subchapter.
Product means a package of health insurance coverage benefits with a discrete set of rating and pricing methodologies offered in a State. The term product includes any product that is discontinued and newly filed within a 12-month period when the changes to the product meet the standards of § 147.106(e)(2) or (3) of this subchapter (relating to uniform modification of coverage).
Rate increase means, with respect to rates filed—
(1) For coverage effective prior to January 1, 2017, any increase of the rates for a specific product offered in the individual or small group market.
(2) For coverage effective on or after January 1, 2017, any increase of the rates for a specific product or plan within a product offered in the individual or small group market.
Rate increase subject to review means a rate increase that meets the criteria set forth in § 154.200.
Secretary means the Secretary of the Department of Health and Human Services.
Small group market has the meaning given the term in § 144.103 of this subchapter.
State means each of the 50 States and the District of Columbia.
Unreasonable rate increase means:
(1) When CMS is conducting the review required by this part, a rate increase that CMS determines under § 154.205 is:
(i) An excessive rate increase;
(ii) An unjustified rate increase; or
(iii) An unfairly discriminatory rate increase.
(2) When CMS adopts the determination of a State that has an Effective Rate Review Program, a rate increase that the State determines is excessive, unjustified, unfairly discriminatory, or otherwise unreasonable as provided under applicable State law.
§ 154.103   Applicability.
(a) In general. The requirements of this part apply to health insurance issuers offering health insurance coverage in the individual market and small group market.
(b) Exceptions. The requirements of this part do not apply to—
(1) Grandfathered health plan coverage as defined in § 147.140 of this subchapter;
(2) Excepted benefits as described in section 2791(c) of the PHS Act; and
(3) For coverage effective on or after July 1, 2018, student health insurance coverage as defined in § 147.145 of this subchapter.
§ 154.200   Rate increases subject to review.
(a) A rate increase filed in a State, or effective in a State that does not require a rate increase to be filed, is subject to review if:
(1) The rate increase is 15 percent or more applicable to a 12-month period that begins on January 1, as calculated under paragraph (b) of this section; or
(2) The rate increase meets or exceeds a State-specific threshold applicable to a 12-month period that begins on January 1, as calculated under paragraph (b) of this section, determined by the Secretary. A State-specific threshold shall be based on factors impacting rate increases in a State to the extent that the data relating to such State-specific factors are available by August 1 of the preceding year. States interested in proposing a State-specific threshold greater than the Federal default stated in paragraph (a)(1) of this section are required to submit a proposal for approval of such threshold to the Secretary by August 1 of the preceding year, in the form and manner specified by the Secretary.
(b) A rate increase meets or exceeds the applicable threshold set forth in paragraph (a) of this section if the average increase, including premium rating factors described in § 147.102 of this subchapter, for all enrollees weighted by premium volume for any plan within the product meets or exceeds the applicable threshold.
(c) If a rate increase that does not otherwise meet or exceed the threshold under paragraph (b) of this section meets or exceeds the threshold when combined with a previous increase or increases during the 12-month period preceding the date on which the rate increase would become effective, then the rate increase must be considered to meet or exceed the threshold and is subject to review under § 154.210, and such review shall include a review of the aggregate rate increases during the applicable 12-month period.
§ 154.205   Unreasonable rate increases.
(a) When CMS reviews a rate increase subject to review under § 154.210(a), CMS will determine that the rate increase is an unreasonable rate increase if the increase is an excessive rate increase, an unjustified rate increase, or an unfairly discriminatory rate increase.
(b) The rate increase is an excessive rate increase if the increase causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided under the coverage. In determining whether the rate increase causes the premium charged to be unreasonably high in relationship to the benefits provided, CMS will consider:
(1) Whether the rate increase results in a projected medical loss ratio below the Federal medical loss ratio standard in the applicable market to which the rate increase applies, after accounting for any adjustments allowable under Federal law;
(2) Whether one or more of the assumptions on which the rate increase is based is not supported by substantial evidence; and
(3) Whether the choice of assumptions or combination of assumptions on which the rate increase is based is unreasonable.
(c) The rate increase is an unjustified rate increase if the health insurance issuer provides data or documentation to CMS in connection with the increase that is incomplete, inadequate or otherwise does not provide a basis upon which the reasonableness of an increase may be determined.
(d) The rate increase is an unfairly discriminatory rate increase if the increase results in premium differences between insureds within similar risk categories that:
(1) Are not permissible under applicable State law; or
(2) In the absence of an applicable State law, do not reasonably correspond to differences in expected costs.
§ 154.210   Review of rate increases subject to review by CMS or by a State.
(a) Except as provided in paragraph (b) of this section, CMS will review a rate increase subject to review to determine whether it is unreasonable, as required by this part.
(b) CMS will adopt a State's determination of whether a rate increase is an unreasonable rate increase, if the State:
(1) Has an Effective Rate Review Program as described in § 154.301; and
(2) The State provides to CMS, on a form and in a manner prescribed by the Secretary, its final determination of whether a rate increase is unreasonable, which must include a brief explanation of how its analysis of the relevant factors set forth in § 154.301(a)(3) caused it to arrive at that determination, within five business days following the State's final determination.
(c) CMS will post and maintain on its Web site a list of the States with market segments that meet the requirements of paragraph (b) of this section.
§ 154.215   Submission of rate filing justification.
(a) A health insurance issuer must submit to CMS and to the applicable State (if the State accepts such submissions) the information specified below on a form and in a manner prescribed by the Secretary.
(1) For all single risk pool products, including new and discontinuing products, the Unified Rate Review Template, as described in paragraph (d) of this section;
(2) For each single risk pool product that includes a plan that is subject to a rate increase, regardless of the size of the increase, the unified rate review template and actuarial memorandum, as described in paragraph (f) of this section;
(3) For each single risk pool product that includes a plan with a rate increase that is subject to review under § 154.210, all parts of the Rate Filing Justification, as described in paragraph (b) of this section
(b) A Rate Filing Justification includes one or more of the following:
(1) Unified rate review template (Part I), as described in paragraph (d) of this section.
(2) Written description justifying the rate increase (Part II), as described in paragraph (e) of this section.
(3) Rating filing documentation (Part III), as described in paragraph (f) of this section.
(c) [Reserved]
(d) Content of unified rate review template (Part I): The unified rate review template must include the following as determined appropriate by the Secretary:
(1) Historical and projected claims experience.
(2) Trend projections related to utilization, and service or unit cost.
(3) Any claims assumptions related to benefit changes.
(4) Allocation of the overall rate increase to claims and non-claims costs.
(5) Per enrollee per month allocation of current and projected premium.
(6) Three year history of rate increases for the product associated with the rate increase.
(e) Content of written description justifying the rate increase (Part II): The written description of the rate increase must include a simple and brief narrative describing the data and assumptions that were used to develop the rate increase and including the following:
(1) Explanation of the most significant factors causing the rate increase, including a brief description of the relevant claims and non-claims expense increases reported in the rate increase summary.
(2) Brief description of the overall experience of the policy, including historical and projected expenses, and loss ratios.
(f) Content of rate filing documentation (Part III): The rate filing documentation must include an actuarial memorandum that contains the reasoning and assumptions supporting the data contained in Part I of the Rate Filing Justification. Parts I and III must be sufficient to conduct an examination satisfying the requirements of § 154.301(a)(3) and (4) and determine whether the rate increase is an unreasonable increase. Instructions concerning the requirements for the rate filing documentation will be provided in guidance issued by CMS.
(g) If the level of detail provided by the issuer for the information under paragraphs (d) and (f) of this section does not provide sufficient basis for CMS to determine whether the rate increase is an unreasonable rate increase when CMS reviews a rate increase subject to review under § 154.210(a), CMS will request the additional information necessary to make its determination. The health insurance issuer must provide the requested information to CMS within 10 business days following its receipt of the request.
(h) Posting of the disclosure on the CMS Web site:
(1) CMS promptly will make available to the public on its Web site the information contained in Part II of each Rate Filing Justification.
(2) CMS will make available to the public on its website the information contained in Parts I and III of each Rate Filing Justification that is not a trade secret or confidential commercial or financial information as defined in HHS's Freedom of Information Act regulations, 45 CFR 5.31(d).
(3) CMS will include a disclaimer on its Web site with the information made available to the public that explains the purpose and role of the Rate Filing Justification.
(4) CMS will include information on its Web site concerning how the public can submit comments on the proposed rate increases that CMS reviews.
§ 154.220   Timing of providing the rate filing justification.
A health insurance issuer must submit applicable sections of the Rate Filing Justification for all single risk pool coverage in the individual or small group market, as follows:
(a) For rate increases for coverage effective prior to January 1, 2016:
(1) If a State requires that a proposed rate increase be filed with the State prior to the implementation of the rate, the health insurance issuer must submit to CMS and the applicable State the Rate Filing Justification on the date on which the health insurance issuer submits the proposed rate increase to the State.
(2) For all other States, the health insurance issuer must submit to CMS and the State the Rate Filing Justification prior to the implementation of the rate increase.
(b) For coverage effective on or after January 1, 2017, by the earlier of the following:
(1) The date by which the State requires submission of a rate filing; or
(2) The date specified in guidance by the Secretary.
§ 154.225   Determination by CMS or a State of an unreasonable rate increase.
(a) When CMS receives a Rate Filing Justification for a rate increase subject to review and CMS reviews the rate increase under § 154.210(a), CMS will make a timely determination whether the rate increase is an unreasonable rate increase.
(1) CMS will post on its Web site its final determination and a brief explanation of its analysis, consistent with the form and manner prescribed by the Secretary under § 154.210(b)(2), within five business days following its final determination.
(2) If CMS determines that the rate increase is an unreasonable rate increase, CMS will also provide its final determination and brief explanation to the health insurance issuer within five business days following its final determination.
(b) If a State conducts a review under § 154.210(b), CMS will adopt the State's determination of whether a rate increase is unreasonable and post on the CMS Web site the State's final determination described in § 154.210(b)(2).
(c) If a State determines that the rate increase is an unreasonable rate increase and the health insurance issuer is legally permitted to implement the unreasonable rate increase under applicable State law, CMS will provide the State's final determination and brief explanation to the health insurance issuer within five business days following CMS's receipt thereof.
§ 154.230   Submission and posting of Final Justifications for unreasonable rate increases.
(a) If a health insurance issuer receives from CMS a final determination by CMS or a State that a rate increase is an unreasonable rate increase, and the health insurance issuer declines to implement the rate increase or chooses to implement a lower increase, the health insurance issuer must submit to CMS timely notice that it will not implement the rate increase or that it will implement a lower increase on a form and in the manner prescribed by the Secretary.
(b) If a health insurance issuer implements a lower increase as described in paragraph (a) of this section and the lower increase does not meet or exceed the applicable threshold under § 154.200, such lower increase is not subject to this part. If the lower increase meets or exceeds the applicable threshold, the health insurance issuer must submit a new Rate Filing Justification under this part.
(c) If a health insurance issuer implements a rate increase determined by CMS or a State to be unreasonable, within the later of 10 business days after the implementation of such increase or the health insurance issuer's receipt of CMS's final determination that a rate increase is an unreasonable rate increase, the health insurance issuer must:
(1) Submit to CMS a Final Justification in response to CMS's or the State's final determination, as applicable. The information in the Final Justification must be consistent with the information submitted in the Rate Filing Justification supporting the rate increase; and
(2) Prominently post on its Web site the following information on a form and in the manner prescribed by the Secretary:
(i) The information made available to the public by CMS and described in § 154.215(h).
(ii) CMS's or the State's final determination and brief explanation described in §§ 154.225(a) and 154.210(b)(2), as applicable; and
(iii) The health insurance issuer's Final Justification for implementing an increase that has been determined to be unreasonable by CMS or the State, as applicable.
(3) The health insurance issuer must continue to make this information available to the public on its Web site for at least three years.
(d) CMS will post all Final Justifications on the CMS Web site. This information will remain available to the public on the CMS Web site for three years.
§ 154.301   CMS's determinations of Effective Rate Review Programs.
(a) Effective Rate Review Program. In evaluating whether a State has an Effective Rate Review Program, CMS will apply the following criteria for the review of rates for the small group market and the individual market, and also, as applicable depending on State law, the review of rates for different types of products within those markets:
(1) The State receives from issuers data and documentation in connection with rate increases that are sufficient to conduct the examination described in paragraph (a)(3) of this section.
(2) The State conducts an effective and timely review of the data and documentation submitted by a health insurance issuer in support of a proposed rate increase.
(3) The State's rate review process includes an examination of:
(i) The reasonableness of the assumptions used by the health insurance issuer to develop the proposed rate increase and the validity of the historical data underlying the assumptions.
(ii) The health insurance issuer's data related to past projections and actual experience.
(iii) The reasonableness of assumptions used by the health insurance issuer to estimate the rate impact of the reinsurance and risk adjustment programs under sections 1341 and 1343 of the Affordable Care Act.
(iv) The health insurance issuer's data related to implementation and ongoing utilization of a market-wide single risk pool, essential health benefits, actuarial values and other market reform rules as required by the Affordable Care Act.
(4) The examination must take into consideration the following factors to the extent applicable to the filing under review:
(i) The impact of medical trend changes by major service categories.
(ii) The impact of utilization changes by major service categories.
(iii) The impact of cost-sharing changes by major service categories, including actuarial values.
(iv) The impact of benefit changes, including essential health benefits and non-essential health benefits.
(v) The impact of changes in enrollee risk profile and pricing, including rating limitations for age and tobacco use under section 2701 of the Public Health Service Act.
(vi) The impact of any overestimate or underestimate of medical trend for prior year periods related to the rate increase.
(vii) The impact of changes in reserve needs;
(viii) The impact of changes in administrative costs related to programs that improve health care quality;
(ix) The impact of changes in other administrative costs;
(x) The impact of changes in applicable taxes, licensing or regulatory fees.
(xi) Medical loss ratio.
(xii) The health insurance issuer's capital and surplus.
(xiii) The impacts of geographic factors and variations.
(xiv) The impact of changes within a single risk pool to all products or plans within the risk pool.
(xv) The impact of reinsurance and risk adjustment payments and charges under sections 1341 and 1343 of the Affordable Care Act.
(5) The State's determination of whether a rate increase is unreasonable is made under a standard that is set forth in State statute or regulation.
(b) Public disclosure and input. (1) In addition to satisfying the provisions in paragraph (a) of this section, a State with an Effective Rate Review Program must provide:
(i) For proposed rate increases subject to review, access from its Web site to at least the information contained in Parts I, II, and III of the Rate Filing Justification that CMS makes available on its Web site (or provide CMS's Web address for such information), and have a mechanism for receiving public comments on those proposed rate increases, no later than the date specified in guidance by the Secretary.
(ii) Beginning with rates filed for coverage effective on or after January 1, 2016, for all final rate increases (including those not subject to review), access from its Web site to at least the information contained in Parts I, II, and III of the Rate Filing Justification (as applicable) that CMS makes available on its Web site (or provide CMS's Web address for such information), no later than the first day of the annual open enrollment period in the individual market for the applicable calendar year.
(2) If a State intends to make the information in paragraph (b)(1)(i) of this section available to the public prior to the date specified by the Secretary, or if it intends to make the information in paragraph (b)(1)(ii) of this section available to the public prior to the first day of the annual open enrollment period in the individual market for the applicable calendar year, the State must notify CMS in writing, no later than five (5) business days prior to the date it intends to make the information public, of its intent to do so and the date it intends to make the information public.
(3) A State with an Effective Rate Review Program must ensure the information in paragraphs (b)(1)(i) and (ii) of this section is made available to the public at a uniform time for all proposed and final rate increases, as applicable, in the relevant market segment and without regard to whether coverage is offered through or outside an Exchange.
(c) CMS will determine whether a State has an Effective Rate Review Program for each market based on information available to CMS that a rate review program meets the criteria described in paragraphs (a) and (b) of this section.
(d) CMS reserves the right to evaluate from time to time whether, and to what extent, a State's circumstances have changed such that it has begun to or has ceased to satisfy the criteria set forth in paragraphs (a) and (b) of this section.