By Marc Kilmer
U.S. Health and Human Services Secretary Kathleen Sebelius recently announced the health insurance premium rate increases proposed for five states by Trustmark Life Insurance Company were “unreasonable.”
The rate increases for the states of Alabama, Pennsylvania, Arizona, Virginia, and Wyoming were 13 percent. HHS contends an independent review determined these rate increases were excessive.
“Before the Affordable Care Act (ACA), consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability," said Sebelius in a January statement. “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.”
Trustmark Pushes Back
Not surprisingly, Trustmark has a different view.
Patton Hallow, spokesperson for Trustmark, responded to HHS by saying, “we respectfully disagree.”
“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,” Hallow said. Trustmark’s increases were already implemented in the fall of 2011, she added.
Merrill Matthews, a resident scholar at the Institute for Policy Innovation, agrees Trustmark’s rate increases may not be “excessive” as HHS claims.
“Trustmark asked for the increases in five states, although it sells coverage in many more,” notes Matthews. “That limited number tends to support Trustmark's claim that the increase is due to health care costs in those states. For example, hospital mergers that limit the ability of health insurers to negotiate lower reimbursement rates, new state-imposed mandates or regulations, or higher utilization rates could all play a role in the increase. Or it could be that Trustmark imposed lower increases for a few years only to find out now that it needs to catch up. The point is that health insurance premiums are often driven by state-specific actions and not insurance greed.”
No Authority to Block Increases
HHS has no authority to roll back these rate increases. Although the Obama administration previously sought power to do so, the final version of their health care legislation only included language giving HHS the power to determine whether premiums that increased by more than 10 percent a year are “reasonable.”
Matthews points out that even though HHS has no authority to reverse Trustmark’s decision, there may be other ways the agency can affect any insurer that increases rates in the face of HHS criticism.
“ObamaCare gives the secretary of HHS so much power and discretion over the health insurance system, and Medicare and Medicaid, that the department could create problems in other ways,” said Matthews. “More importantly, HHS can just make life—and business—miserable for any insurer that doesn't buckle under HHS whims. So the question isn't whether Trustmark must conform but is it wise not to.”