HHS Nixes Health Insurance Premium Increases in 5 States

By Susan Jones | January 13, 2012 | 11:23 AM EST

Health and Human Services Secretary Kathleen Sebelius said on Nov. 14, 2011 that $1 billion in health care grants were a way of 'sparking' the U.S. economy. (CNSNews.com/Penny Starr)

(CNSNews.com) - The Obama administration, invoking Obamacare, is telling an insurance company that its planned premium hike in five states is "unreasonable," excessive and must be rolled back.

Trustmark Life Insurance Company said it "respectfully disagrees."

Trustmark recently raised rates by 13 percent in Alabama, Arizona, Pennsylvania, Virginia, and Wyoming, a move that affects some 10,000 subscribers.

As of September 1, 2011, the Affordable Care Act requires health insurers seeking to raise their rates by 10 percent or more to submit their request to outside reviewers to determine whether the proposed rates are unreasonable.

"Before the Affordable Care Act, consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability," said Secretary Kathleen Sebelius in a news release.  "Now, insurance companies are required to disclose rate increases over 10 percent and justify these increases.  It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so."

In the case of Trustmark, 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 justifications were based on unreasonable assumptions."

“We respectfully disagree with the assumptions and conclusions drawn today by the U.S. Department of Health and Human Services,” the company said in a statement that was reported by the Washington Times. “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.”

HHS says the states have primary responsibility for reviewing insurance rates, and the Affordable Care Act provides them with $250 million in grants to boost their ability to conduct rate reviews. Some 157 million of that total already has been distributed.