Obama administration calls on health insurer to reduce rate hike

The Obama administration called on a health insurance company to reduce a planned rate increase in Pennsylvania, using a tool in the new healthcare law for the first time to pressure insurers to restrain rising premiums.

Officials at the Department of Health and Human Services said Monday that Everence Insurance Co.’s plan to raise rates by 12% next year on about 5,000 people who work for small businesses in Pennsylvania was “unreasonable.”

That rate is not justified by what the insurer was expected to pay out in medical claims in the state, said Health and Human Services Secretary Kathleen Sebelius.

“We’re calling on the insurance company to immediately withdraw this rate and provide refunds or credits to any beneficiaries who have already paid the unreasonable amount,” Sebelius said, promising that the Everence review would be “the first of many.”

Officials at Indiana-based Everence stood by the rate increase and disputed the federal government’s analysis, asserting that their review of claims data justified the premium hike.

“We have no plans to make any changes,” said spokeswoman Judy Martin Godshalk, adding that the company would welcome a discussion with federal regulators.

The healthcare law that President Obama signed last year does not give federal or state insurance regulators any new authority to prohibit rate hikes like the Everence increase in Pennsylvania.

But the law allows government officials to require insurers seeking increases to publicly justify them, a move that proponents hope will persuade companies to think twice about proposing excessive hikes. Full story…