Health insurance rate hikes in five states have been deemed "unreasonable" by the U.S. Department of Health and Human Services, under the Patient Protection and Affordable Care Act of 2010 (PPACA), HHS Secretary Kathleen Sebelius announced today, this time targeting Trustmark Life Insurance Company's premium increases.
HHS alleged that Trustmark Life Insurance Company, a division of Trustmark Cos., in Lakeforest, Ill., has proposed "unreasonable" health insurance premium increases in Alabama, Arizona, Pennsylvania, Virginia, and Wyoming. The increases would affect nearly 10,000 residents across these five states.
"It's time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so," Sebelius stated.
To make these determinations, HHS used its new rate review authority from the PPACA to determine whether premium increases of over 10% are reasonable. PPACA includes features that are meant to promote transparency and hold insurers accountable for rate increases and how they spend your premium dollars. Under the rate review feature, which took effect on Sept. 11, health insurance companies must tell consumers when they want to increase insurance rates for individual or small group policies by an average of 10% or more.
HHS determined 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, the agency stated.
"We respectfully disagree with the assumptions and conclusions drawn today by [HHS]. Our premiums are driven by the rising cost and increased utilization of medical services," Trustmark said in a statement to reporters.
"As a smaller carrier, our loss ratios can vary significantly from year to year, and we take that volatility into consideration," the company stated.
"Trustmark has been and will continue to be in compliance with all aspects of the Affordable Care Act, including requirements related to the Federal Medical Loss Ratio Rule [MLR]," the company stated. "If there are instances where we do not reach the required loss ratio as calculated under the federal regulations, we will, promptly and in accordance with the Affordable Care Act, rebate the difference to those customers."
HHS pointed out that in the five states, Trustmark has raised rates by 13%. For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2% and 18.1%, respectively.
At the time that Trustmark submitted the rate increase, Pennyslvania did not have review authority, which is why HHS conducted its review. A new law will give Pennsylvania regulators rate review authority starting March 1, 2012, Trustmark said.
