US Seeks Rollback of a Health Insurer’s “Excessive” Rate Increase

Washington – The Obama administration said Thursday that rate increases sought by ahealth insurance company were unreasonable, and it ordered the insurer to rescind them or justify its refusal to do so.

Kathleen Sebelius, the secretary of health and human services, issued the finding against the carrier, Trustmark Life Insurance Company, a unit of Trustmark Mutual Holding Company.

Ms. Sebelius said that “the excessive rate increases” would affect nearly 10,000 people in Alabama, Arizona, Pennsylvania, Virginia and Wyoming.

“It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so,” Ms. Sebelius said, wielding power granted by the new health care law.

The 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, based in Lake Forest, Ill., said: “We respectfully disagree with the assumptions and conclusions drawn today by the Department of Health and Human Services. Our premiums are driven by the rising cost and increased utilization of medical services.”

“Trustmark has been and will continue to be in compliance with all aspects” of the law, Ms. Gallaher added.

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.

The administration used its rate review authority once before, on a smaller scale, in an effort to stop what it described as an unreasonable rate increase of 12 percent by the Everence Insurance Company in Pennsylvania. The company says the increase reflects the cost of providing coverage to small businesses there.

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 percent in each of the five states. Combined with other rate changes in the last 12 months, it said, these proposals would result in rate increases averaging 27 percent in Alabama, 18 percent in Arizona and 15 percent in Pennsylvania.

The company cited the rising costs of hospital care, doctors’ services and prescription drugs as a reason for seeking higher rates.

Nationally, health spending rose at exceptionally low rates in 2009 and 2010, as the recession prompted many people to postpone care they could not afford because they had lost jobs, income and health insurance.

Under the new law, insurers must spend at least 80 percent of premium revenues on medical care and efforts to improve it.

Gary Cohen, acting director of insurance oversight at the Department of Health and Human Services, said Trustmark did not meet this standard in any of the five states.

Ms. Gallaher, the spokeswoman for Trustmark, said the share of premiums paid out in benefits, known as the medical loss ratio, “can vary significantly from year to year.”

“If there are instances where we do not reach the required loss ratio as calculated under federal regulations,” Ms. Gallaher said, “we will, promptly and in accordance with the Affordable Care Act, rebate the difference to customers.”

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.

Ms. Sebelius praised Connecticut, New York and Oregon for forcing insurers to scale back rate increases.

In Louisiana, Missouri and Montana, Mr. Cohen said, proposed rate increases of more than 10 percent have been found reasonable, in relation to the benefits provided.

This article, “US Seeks Rollback of a Health Insurer’s ‘Excessive’ Rate Increase,” originally appeared in The New York Times.