HHS Deems 12 Percent Small Business Rate Hike in Pennsylvania Unreasonable; Consumer Watchdog Says Prior Approval Authority Needed to Require Refunds

WASHINGTON, Nov. 21, 2011 /PRNewswire-USNewswire/ -- The Department of Health and Human Services deemed a health insurance rate hike unreasonable under the federal health reform law for the first time today, and called on a Pennsylvania health insurer, Everence, to reverse the 12% increase and refund excess premiums to policyholders.

However, neither federal nor Pennsylvania regulators have the power to require the insurer to reduce the unreasonable rate, demonstrating the need to expand prior approval rate regulation and allow states to reject excessive increases, said Consumer Watchdog.

In a report issued this year, Consumer Watchdog found that states with the power to reject unreasonable rates have begun to successfully hold down health insurance premium increases. Read the report: http://www.consumerwatchdog.org/resources/cwrateregulation.pdf

"Everence should reverse this unreasonable rate hike and refund the excess premiums to their customers, as federal regulators requested. But what if they don't? Pennsylvania consumers should not have to rely on the goodwill of an insurance company to protect them when rates are found to be too high. State regulators must have the power to require companies to reverse unreasonable rate hikes and issue rebates," said Carmen Balber, Washington DC director for Consumer Watchdog.

Workers' share of health insurance premiums grew 63% between 2003 and 2010, and per-person deductibles doubled, according to a report by the Commonwealth Fund last week.

The federal health care law requires insurance companies to publicly justify rate increases of 10% or greater. The HHS review found that the 12% increase imposed by Everence Insurance Company on small businesses in Pennsylvania would result in a medical loss ratio – the amount of money an insurer spends on actual medical care, not executive salaries and overhead – that does not meet the 80% federal minimum.

The federal health reform law also set aside $250 million in grants to states in order to strengthen rate regulation. $27.5 million was reserved for states that have, or will implement, prior approval regulation.

A ballot initiative filed this month in California by Consumer Watchdog would give the insurance commissioner the ability to take action if a public review finds a health insurance rate increase to be excessive or unreasonable.

The ballot measure, called the Insurance Rate Public Justification and Accountability Act, is modeled after the California law requiring prior review and approval of automobile and other property insurance rate increases which has saved drivers $62 billion since 1998, according to the Consumer Federation of America.

Consumer Watchdog is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org

SOURCE Consumer Watchdog