The Department of Health and Human Services (HHS) has issued a preliminary version of the regulation aimed at controlling "unreasonable" rate increases at the national level.

The draft regulation requires carriers to publicly disclose any individual or small group health insurance rate increases higher than 10 percent. The regulation is still open to comment and subject to change. Double-digit increases will trigger a review by state or federal regulators to determine if they're justified. States will get the first shot at scrutinizing the rate hikes. If HHS determines a state lacks the ability to do a thorough actuarial review of premium increases, federal regulators step in. States are eligible for federal grants to bolster their review capabilities and 45 states have taken advantage of the program to date.

This 10 percent threshold can be adjusted on a state-by-state basis over time. After 2011, a state-specific threshold would be set for the disclosure of rate increases, using data that reflect each state's cost trends.

Significantly, neither the regulation nor the Affordable Care Act gives HHS the power to deny rate increases. If they determine a premium hike sought by a carrier is unjustified it will post that finding on a government website, but the increase will still be permitted unless a state regulator prevents it. Most states already review rate increase proposals and some can deny rate increases on individual and small group medical insurance coverage.

How it Works

The mechanics of the rate review are described in the proposed regulation. If they want a rate increase over 10 percent or greater, the carrier will need to notify HHS and post its justification on the insurer's web site. The HHS will consider whether:

• The rate increase results in a projected future loss ratio below the Federal medical loss ratio (MLR) standard.
• One or more of the assumptions on which the rate increase is based are not supported by substantial evidence.
• The choice of assumptions or combination of assumptions on which the rate increase is based is unreasonable.

The timing of the rate increase is determined by state law, so HHS' review cannot delay implementation of the rate change. What it will do, however, is require disclosure of a great deal of information, bringing an unprecedented amount of transparency to the rate setting process. The new regulation provides a strong incentive for insurers to do a thorough review of their justifications before asking for big rate increases.

According to the Affordable Care Act, the cost of over-the-counter medicines or drugs can be reimbursed from a Cafeteria Plan / Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) if you have a prescription.

The Internal Revenue Service has issued new guidance allowing the continued use of FSA and HRA debit cards for the purchase of prescribed over-the-counter medicines and drugs. The new guidance modifies previous guidance to permit taxpayers to continue using FSA and HRA debit cards to purchase over-the-counter medications for which the taxpayer has a prescription. Effective after Jan. 15, 2011, in accordance with the new guidance, this use of debit cards must comply with procedures reflecting those that pharmacies currently follow when selling prescribed medicines or drugs.

The procedures include requirements that a prescription for the medication be presented to the pharmacy or the mail-order or web-based vendor that dispenses the medication and that proper records be retained.

The number of Californians who lack health insurance, particularly employer-based coverage, has continued to climb during the ongoing recession, according to the California HealthCare Foundation's(CHCF) annual California Health Care Almanac. CHCF publishes CaliforniaHealthline.

Coverage Statistics

• About 6.8 million Californians are uninsured, or more than 20% of the state's residents;
• Over the past 20 years, the percentage of residents younger than age 65 with employer-based coverage has decreased from 69% to 52%,
• Increases in Medi-Cal enrollment partially have offset the drop in coverage. Medi-Cal is California's Medicaid program.

Income-Related Findings

• The number of middle-income residents without health insurance has increased over recent years,
• In 2009, about one-third of the state's uninsured residents had incomes of more than $50,000 annually; and
• Over the past 10 years, the number of uninsured residents among families with annual incomes between $50,000 and $75,000 nearly doubled.

Additional Findings

• Employees in businesses of all sizes, including the self-employed, are more likely to be uninsured in California than in the U.S. overall;
• About 60% of California's uninsured population is Latino; and
• Up to 60% of uninsured children qualify for Medi-Cal or Healthy Families, California's Children's Health Insurance Program.

According to CHCF, the number of uninsured Californians is likely to continue increasing over the coming years because of the state's challenging economic conditions and its high unemployment rate.