HHS deems insurance premium increases unreasonable in nine states

Health & Human Services Secretary Kathleen Sebelius announced on March 22 that health insurance premium increases in nine states have been deemed “unreasonable” under the rate-review authority granted by the Affordable Care Act.

HHS determined, after independent expert review, that two insurance companies -- John Alden Life Insurance Company and Time Insurance Company -- have proposed unreasonable health insurance premium increases in nine states: Arizona, Idaho, Louisiana, Missouri, Montana, Nebraska, Virginia, Wisconsin and Wyoming.

According to Steve Larsen, deputy CMS administrator and director of the Center for Consumer Information and Insurance Oversight, during a press call on March 22, the rate hikes would affect over 42,000 residents across the nine states.

“The requested increases in some cases were as high as 24 percent,” said Larson. “These increases were reviewed by independent experts through a standard process that we conduct here, a data-driven process to determine whether they are reasonable applying the regulatory criteria that we had previously issued.”

Larson said in these cases HHS determined that the rate increases were unreasonable because the insurer would be spending a low percentage of premium dollars on actual medical care and quality improvements, and because the rate filings relied on national data rather than state-specific data, “which we believe is unreasonable under the circumstances.”

“As a consequence, HHS has requested that the companies rescind these rates or explain, if they refuse to do so, why that is. The companies were notified [March 22] and have 10 days to either modify or withdraw their rate. If they don’t modify their rate, they need to post a public justification,” said Larson. “These determinations are another example of how rate review is helping to control rising premiums and bringing unprecedented transparency to the market for consumers.”

Sebelius also released a new report showing that, six months after HHS began reviewing proposed health insurance rate increases, consumers are already seeing results.

Since the rate review program took effect in 2011, health insurers have proposed fewer double-digit rate increases. Furthermore, more states have taken an active role in reducing rate increases, and consumers in all states are getting straight answers from their insurance companies when their rates increase by 10 percent or more, according to Larson.

As of March 10, 2012, the justifications and analysis of 186 double-digit rate increases for plans covering 1.3 million people have been posted at HealthCare.gov, resulting in a decline in rate increases.

According to the report, in the last quarter of 2011 alone, states reported that premium increases dropped by 4.5 percent, and in states like Nevada, premiums actually declined.

Most rates are reviewed by states and many states have the authority to reject unreasonable premium increases. Since the passage of the health care law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets, said Larson.

Information on the specific determinations is available here.

Follow Kelsey Brimmer on Twitter @kbrimmerhfn.

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