Obama administration hands out money to boost state health insurance oversight

The Obama administration Tuesday announced $109 million in grants to states to help them increase oversight of health insurers, a key part of the new law the president signed last year.

The grants come on the heels of new rules enacted this month that require insurers to post on their websites explanations of premium increases exceeding 10% and to submit the hikes to state and federal regulators, who also will post them starting this year.

And the grants continue the administration’s efforts to step up regulation of state health insurance markets by bolstering local regulators, who retain responsibility for overseeing the industry.

“We absolutely expect for this … to help have a moderating influence on premiums,” said Steve Larsen, who oversees the insurance efforts at the Department of Health and Human Services.

Some states, such as Oregon and Rhode Island, have the power to block rate hikes they deem excessive. But 30 states still don’t have this authority in both the individual and small-group markets, according to a 2010 survey by the nonprofit Kaiser Family Foundation.

The Obama administration has urged state leaders to pass legislation to get this authority.

And 20 of the 29 states receiving new grants have what is called “prior approval” authority in either the individual or small-group markets, according to administration officials.

Among those receiving grants are Illinois, Maryland, Pennsylvania and California, which received two grants because insurance oversight is split between the state insurance commissioner and the state’s Department of Managed Care.

The new grants come on top of $48 million the administration handed out last year to 42 states, the District of Columbia and five territories.

That money has helped states hire additional regulators and strengthen their information technology systems to review premium increases submitted by insurance companies.

Insurance industry officials have maintained the additional regulation is unnecessary, pointing out that healthcare costs are being driven up by rising underlying medical costs.

But Larsen noted Tuesday that insurers have continued to seek doubt digit increases even as the economic downturn has depressed consumer demand for medical services.

He also said the administration was seeing anecdotal evidence that the increased scrutiny was restraining insurance companies in some states.

Though many of the new grants announced Thursday went to states led by Democratic governors who have supported the new healthcare law, 12 went to states with Republican governors, some of whom are suing to overturn the law.

GOP-led states getting money include Indiana, Michigan, Mississippi, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, South Dakota, Tennessee, Utah and Wisconsin.