HHS Says Two Health Insurers Proposed Unreasonable Rate Increases

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By Sara Hansard  

Two health insurers have proposed unreasonable rate increases, and one of the insurer's rates were also unjustified, the Department of Health and Human Services said April 16.

Combined with a determination announced in Wisconsin on April 11, the rate hikes, which are as high as 24 percent, would affect more than 60,000 residents in seven states, said Gary Cohen, director of the oversight group in the Center for Consumer Information and Insurance Oversight. They represent HHS's largest set of determinations of unreasonable and unjustified rate increases to date in terms of the number of consumers affected, he said.

HHS called on the companies to rescind the rates if they are in effect, or to refrain from putting them into effect; to issue refunds to consumers; or to publicly explain why they refuse to do so, Cohen said.

Time Insurance Co. of Milwaukee, a unit of Assurant Health, proposed unreasonable premium rate increases for health insurance in Louisiana, Missouri, Montana, Nebraska, and Wyoming, Cohen said.

In addition, United Security Life and Health Insurance Co., a regional insurer based in Bedford Park, Ill., that sells cancer, disability income, health, and life insurance products to individuals and families in six states, has proposed unreasonable and unjustified health insurance premium increases in Arizona, Cohen said. United's increases are excessive, and it failed to provide the federal government sufficient information to determine whether its proposed increase was based on sound data, he said.

Low Spending on Medical Care a Factor.

“Because the insurers would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications for those increases were based on unreasonable assumptions--for example they combined national and state data where the state data was adequate to determine what the rate should be--we determined that these rate increases are unreasonable for enrollees of these plans,” Cohen said.

Under the Patient Protection and Affordable Care Act, HHS has the authority to determine whether premium rate increases are unreasonable in states that do not conduct rate reviews that HHS finds to be adequate. HHS does not have authority to overturn rate increases, but companies found to be raising rates unreasonably must post justifications on HHS's website, as well as on their own website. Under HHS's rate review regulation, it reviews all rates of 10 percent or more to determine whether they are unreasonable.

Cohen also said the determinations, made by independent actuarial experts, were based on whether the companies made reasonable assumptions about the increases expected in their costs. A finding that a rate increase is unjustified is based on whether the company provided enough data to make a rate projection, he said.

Company Response.

An Assurant Health spokeswoman told BNA in an email, “Assurant Health is committed to setting premium rates at a level that will allow us to continue to serve the needs of our customers. We maintain our recent rate filings are actuarially justified and appropriate.”

She added that the company “uses medical trend data that factors in both the rising cost of health care and the utilization of medical services and prescription drugs by our customers in determining premium rates.”

United Security could not be reached for comment April 16.

Under PPACA, individual and small group plans must spend at least 80 percent of premiums on medical claims or quality improvements, and large plans must spend at least 85 percent or refund the difference to consumers. The policies affected by the rate determinations were all in the individual market, except for one small group plan operating in Missouri and one small group plan operating in Wyoming, Cohen said.

More Grants for More Authority.

HHS also said it is sending a letter to 13 states that have not passed legislation giving regulators the authority to increase rates. HHS is offering them additional rate review grants if they enact such legislation. Since passage of PPACA in 2010, the number of states with that authority increased from 30 to 37, with several states extending existing disapproval authority to new markets, Cohen said.

Cohen said that the rate review program has led to insurers proposing fewer double-digit increases. In addition, more states have taken an active role in reducing rate increases, and consumers are getting more information on why rates are being raised by 10 percent or more, he said.

By Sara Hansard  

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