HHS Secretary Kathleen Sebelius announced today (January 12, 2012) HHS considers to be unreasonable premium rate increases proposed by Trustmark Life Insurance Company in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming.  According to HHS, the allegedly excessive rate hikes would affect nearly 10,000 residents across these five states.

According to HHS, a review of the health insurance premium disclosures filed by Trustmark Life Insurance Company here found that Trustmark has raised rates by 13 percent in these five states.  For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, HHS claims rates have increased by 27.2 percent and 18.1 percent, respectively.   According to HHS, HHS says that an independent review engaged by HHS found that the rate increases were unreasonable because the insurer “would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.”  HHS is calling upon Trustmark Health Insurance Company to rescind the rates and issue rebates to consumers or publically explain its refusal to do so.  The new rate review procedures allow Trustmark Health Insurance Company and other carriers accused by HHS of making unreasonable rate increases various options to dispute the charges

The rate review and reduction demand by HHS reflects its efforts to use its “rate review” authority from the Affordable Care Act to discourage health insurers from raising health insurance premiums by more than 10 percent.  HHS requires health insurers to notify HHS of rate increases over 10 percent and justify these increases. HHS generally views health insurance premium increases of more than 10 percent as unreasonable.  Under these new rate review powers,

Under the new rate review rules, HHS has the power to review proposed rate reviews and to report its findings but does not have the direct authority to force health insurers to limit premium increases to less than 10 percent or to impose legal or administrative sanctions directly against insurers for making what HHS views as unreasonable premium increases. However, as many as 37 states have the authority to regulate or reject unreasonable premium increases.  In the absence of direct authority to regulate insurer rates, HHS uses its ability to publicize its rate review determinations to invite state regulators and the public to apply pressure to insurers to keep down rate increases. 

In today’s announcement, HHS credits its new rate review powers with helping to prevent health insurance premium increases,  According to HHS, states with the power to regulate insurer premiums increasingly are using this authority.  Examples of how states have used this authority include:

• In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;
• In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;
• In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.
• In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.
• In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.
• In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.

 Targeting health insurers proposing rate increases of 10 or more percent is likely to result in a significant number of reviews.  A Kaiser Family Foundation Employer Health Benefits 2011 Annual Survey found average premiums increased 8% for single coverage and 9% for family coverage through May, 2011.

Companies that HHS finds have made excessive rate increases can either reduce their rate hikes or post a justification on their website within 10 days of the rate review determination.

 For More Information Or Assistance

If you need help reviewing or updating your health benefit program for compliance with ACA or other laws or with any other employment, employee benefit, compensation or internal controls matter, please contact the author of this article, attorney Cynthia Marcotte Stamer.

A 2011 inductee to the American College of Employee Benefits Council, immediate past-Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPPT Employee Benefits & Other Compensation Arrangements, an ABA Joint Committee on Employee Benefits Council Representative, the ABA TIPS Employee Benefit Plan Committee Vice Chair, former ABA Health Law Section Managed Care & Insurance Interest Group Chair, past Southwest Benefits Association Board Member, Employee Benefit News Editorial Advisory Board Member, and a widely published speaker and author,  Ms. Stamer has more than 24 years experience advising businesses, plans, fiduciaries, insurers. plan administrators and other services providers,  and governments on health care, retirement, employment, insurance, and tax program design, administration, defense and policy.   Nationally and internationally known for her creative and highly pragmatic knowledge and work on health benefit and insurance programs, Ms. Stamer’s  experience includes extensive involvement in advising and representing these and other clients on ACA and other health care legislation, regulation, enforcement and administration. 

Widely published on health benefit and other related matters, Ms. Stamer’s insights and articles have appeared in HealthLeaders, Modern Health Care, Managed Care Executive, the Bureau of National Affairs, Aspen Publishers, Business Insurance, Employee Benefit News, the Wall Street Journal, the American Bar Association, Aspen Publishers, World At Work, Spencer Publications, SHRM, the International Foundation, Solutions Law Press and many others.

For additional information about Ms. Stamer and her experience, see www.CynthiaStamer.com.