Health insurer pushes back against order to justify raising rates
As the Obama administration told an Illinois-based insurer that it must publicly justify large premium increases in five states, officials admitted Thursday that the first company they tagged under new rate-review rules increased their rates anyway.
The Department of Health and Human Services has deemed Trustmark Life Insurance Co. to be unreasonable for raising rates by 13 percent in Alabama, Arizona, Pennsylvania, Virginia and Wyoming, urging the company to abandon the plan which is expected to affect nearly 10,000 customers.
Trustmark officials pushed back, largely blaming the increases on medical inflation.
“We respectfully disagree with the assumptions and conclusions drawn today by the U.S. Department of Health and Human Services,” a statement released by the company said. “Our premiums are driven by the rising cost and increased utilization of medical services. As a smaller carrier, our loss ratios can vary significantly from year to year, and we take that volatility into consideration.”
But HHS officials said the company is spending a low percent of premium dollars on actual medical care and cast doubt on its justifications.
Trustmark is the second company to be rebuked by HHS for raising rates after Everence Insurance came under similar fire in November. Under President Obama’s health care law, companies must publicly explain increases of at least 10 percent and submit them to the state or federal government for review.
The aim is to curb the cost of premiums by examining how companies are spending the extra dollars. Companies might get a pass if they return customers’ higher payments back to them through better benefits. But spending money on administration makes them more likely to earn an “unreasonable” rating.
While some states can reject rate increases, the federal government doesn’t have that authority even if it determines that one is unreasonable.
So while HHS called on Everence to abandon a 11.6 percent increase, the company never responded with action — although Vice President Dave Gautsche said at the time that he would welcome a “conversation” with officials about how the company sets its rates.
Federal officials shrugged off Everence’s decision.
“At least consumers were able to see what the reasons were for the increase and were able to take that into consideration in their decisions about what health insurance to purchase,” said Gary Cohen, a consumer oversight director at HHS.
With Thursday’s announcement, HHS has called for the repeal of six major rate increases. The agency has also reviewed three — in Louisiana, Missouri and Montana — but determined that they were reasonable.
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