Federal health officials on Thursday seized a chance to tout their powers to keep health premiums increases low, declaring that Trustmark Life Insurance Company's health plan premium hikes affecting nearly 10,000 people in five states are "excessive" and "unreasonable."
"We're announcing that Trustmark Life Insurance Company has unreasonably increased health insurance premiums for small businesses in five states: Alabama, Arizona, Pennsylvania, Virginia and Wyoming," Gary Cohen, Health and Human Services' Acting Director of Oversight, Center for Consumer Information and Insurance Oversight, said during a news briefing.
"In each case, Trustmark has raised rates by 13% or more over the past year," he said. "These rates are excessive and it's time for Trustmark to immediately rescind the rates, issue refunds to consumers, or to publicly explain their refusal to do so."
The agency made the determination after reviewing a report from an independent actuary it contracted to examine Trustmark's costs and spending. Under the law, the insurance company must demonstrate that it spends at least 80% on healthcare services and quality, and no more than 20% on marketing and CEO bonuses, Cohen said.
"By Trustmark's own admission, [it] didn't plan to abide by this 80/20 rule, instead leaving small businesses with unreasonably high premiums," he said. HHS did not release the actuary's report.
The agency is directing those interested to a special area of HealthCare.gov, which shows the determination for each health insurance company requesting an increase more than 10%, and which has so far received an audited review, and the amount of increases it imposed or is requesting over the past year.
For instance, in the case of Trustmark's small business product in Alabama, the company had requested a 13% increase, and combined with other rate actions over the last 12 months, "rates for this product have increased by 27.5% in the last year," according to the site.
In a statement, HHS Secretary Kathleen Sebelius said that before the provisions in the Affordable Care Act became law, "consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability. Now, insurance companies are required to disclose rate increases over 10% and justify these increases."
Cohen said that HHS has made determinations of unreasonable rate increases on six occasions under its new powers, including these five. The sixth was a November review of Everence Insurance's 12% increase for a plan held by nearly 5,000 subscribers in Pennsylvania.
Three other HHS-ordered actuarial rate reviews, in Montana, Louisiana, and Missouri, resulted in conclusions that the increases were reasonable.
Cohen emphasized that because of its new federal authority to review rate increases in excess of 10%, and because of $250 million in grants to states to set up their own authority to do their own audits, "the number of states with the authority to approve or disapprove rate increases before they take effect has increased from 30 to 37, with several states extending this authority to new markets" since March of 2010.
"It won't surprise you to know that state insurance departments, state governments, would rather review rates in their state than have us do it. Let's be clear," he said.
"So many states have gotten additional authority, knowing that this was going to happen, that somebody was going to be reviewing these rates and making determinations as to whether they were excessive or justified by medical costs or not, they've taken that job on for themselves." He gave six examples.
- In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state's largest insurer, from hiking rates by a proposed 12.9%, instead, limiting the increase to only 3.9%.
- Oregon officials denied a proposed 22.1% hike by Regence, limiting it to 12.8%.
- New Mexico's insurance authority denied a request from Presbyterian Healthcare for a 9.7% rate hike, lowering it to only 4.7%.
- Rhode Island denied rate hikes from United Healthcare of New England ranging from 18% to 20.1%, cutting it to 9.6% to 10.6% Cohen said.
- Pennsylvania reduced Highmark's proposed rate increase of 9.9% to between 4.9% to 8.3%.
- New York denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7%, instead allowing 8.2%.