Ms. Kathleen Sebelius, the secretary of Health and Human Services issued a finding against Trustmark Life Insurance Company, a unit of Trustmark Mutual Holding Company that the rate increases sought by a health insurance company were unreasonable, and it ordered the insurer to rescind them, issue refunds to consumers or publicly explain their refusal to do so.
The excessive rate increases would affect nearly 10,000 people in Alabama, Arizona, Pennsylvania, Virginia and Wyoming.
AdvertisementThe action fits in with White House efforts to demonstrate the value of the new health care law and to portray President Obama as fighting for the economic interests of middle-class families in this election year.
Cindy Gallaher, a spokeswoman for Trustmark, said that they disagreed with the assumptions and conclusions drawn today by the Department of Health and Human Services. Their premiums were driven by the rising cost and increased utilization of medical services. The company cited the rising costs of hospital care, doctors' services and prescription drugs as a reason for seeking higher rates.
The law, signed by President Obama in March 2010, set detailed federal standards for health insurance, which had for decades been regulated mainly by the states. The law calls for the annual review of "unreasonable increases in premiums." Under rules issued last year by Ms. Sebelius, rate increases of 10 percent or more must be reviewed by state or federal officials.
Mr. Obama unsuccessfully sought the power to block rate increases deemed unreasonable, a power that some states have. Even without that authority, administration officials said, their ability to challenge and publicize large increases provides a significant new protection for consumers.
The administration did not release details of its calculations, but said that Trustmark was seeking rate increases of 13% in each of the 5 states. Combined with other rate changes in the last 12 months, it said, these proposals would result in rate increases averaging 27% in Alabama, 18% in Arizona and 15% in Pennsylvania.
Under the new law, insurers must spend at least 80% of premium revenues on medical care and efforts to improve it. The Department of Health and Human Services said Trustmark did not meet this standard in any of the 5 states.
The federal government reviews insurance rate increases in states where it finds that state officials lack the authority or capacity to do so effectively. With encouragement from Washington, a number of states have hired actuaries to analyze proposed rate increases and authorized state officials to reject those found to be excessive.
Connecticut, New York and Oregon were praised for forcing insurers to scale back rate increases. In Louisiana, Missouri and Montana, the proposed rate increases of more than 10% have been found reasonable, in relation to the benefits provided.