Kathleen Sebelius, the secretary of health and human services, issued a final rule establishing procedures for federal and state insurance experts to scrutinize premiums. Insurers, she said, will have to justify rate increases in an environment in which they are doing well financially, with profits exceeding the expectations of many Wall Street analysts.
“Health insurance companies have recently reported some of their highest profits in years and are holding record reserves,” Ms. Sebelius said. “Insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, but many insurance companies continue to raise their rates. Often, these increases come without any explanation or justification.”
Federal health officials proposed the 10 percent threshold in December. The insurance industry criticized it as an arbitrary test that could brand a majority of rate increases as presumptively unreasonable. But the administration rejected the criticism and insisted on the 10 percent standard in the final rule, issued Thursday.
Starting in September 2012, the federal government will set a separate threshold for each state, reflecting trends in insurance and health care costs.