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Skyrocketing health premiums drawing scrutiny from states

As criticism of insurers continues in Washington, D.C., states introduce new rules aimed at curbing rate increases.

By Emily Berry — Posted March 15, 2010

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States are working up their own responses to individual insurance rate hikes as a federal-level backlash continues against health plan premium increases.

Health and Human Services Secretary Kathleen Sebelius met with insurance executives March 4 at the White House to discuss those increases, after she publicly slammed plans' decisions to raise rates steeply in some states for 2010. President Obama, who also spoke out against large rate hikes -- particularly, a 39% jump by Anthem Blue Cross set to go into effect in California on May 1 -- stopped by for part of the meeting.

State commissioners were there, among them Kansas' Sandy Praeger, current occupant of Sebelius' former office. Praeger is chair of the Health Insurance and Managed Care committee of the National Assn. of Insurance Commissioners.

Praeger said in an interview the day before the White House meeting that states should set their own rules, but with a federal minimum level of oversight as a "backstop." Currently commissioners' authority to approve, lower or deny rate increase requests varies widely, as does the application of that authority. She said the NAIC believes state regulators need the authority to oversee rates and to ensure that insurance companies remain solvent, and those two duties shouldn't be separated.

Whether the attention on premium increases produces new state or federal laws remains to be seen, but for now, some action has taken place:

  • California's Attorney General Edmund G. "Jerry" Brown Jr. on Feb. 25 subpoenaed records from the state's seven largest health insurers. The subpoenas were part of his office's ongoing investigation into those companies' business practices. That inquiry was prompted by a report on claims denial rates released in September 2009 and had been focused on HMO plans. Now it will expand to include fee-for-service plans, he said.
  • In Connecticut, state lawmakers introduced legislation that would require the state's insurance commissioner to hold public hearings to determine if a proposed rate increase is "reasonable" before he or she approves it. Insurance Commissioner Thomas Sullivan testified against the legislation at a Feb. 25 committee hearing, saying he prefers using actuarial science and objective standards to judge rate increases, rather than a more subjective measure. Connecticut State Medical Society Executive Vice President Matthew Katz testified that the bill would force insurers to justify rate increases, rather than simply push them through.
  • Colorado Insurance Commissioner Marcy Morrison announced Feb. 24 that her department would double-check WellPoint-owned Anthem Blue Cross and Blue Shield's recently approved rate filings with an eight-week market conduct examination. That follows what she said was a spike in the number of consumer complaints about higher premiums.
  • In Iowa, state lawmakers and U.S. Sen. Charles Grassley (R, Iowa) have asked Wellmark Blue Cross and Blue Shield to justify rates set to rise there by an average of 18% in April. Grassley sent a letter to the plan's CEO Feb. 23 asking for details of the company's operations and actuarial assumptions used in setting rates.
  • In Illinois, Dept. of Insurance Director Michael McRaith has no authority to block rate increases, but he did post a report on the department's Web site March 3 outlining how much rates were set to rise, based on insurers' most recent informational filings.
  • In Oregon, detailed supporting documentation accompanying rate increase requests from insurers also are posted for the public, building on 2007 legislation that made the rate increase request forms public.
  • Indiana House Speaker B. Patrick Bauer and Rep. Craig Fry, chair of the state house's Insurance Committee, asked Rep. Henry Waxman (D, Calif.), chair of the House Energy and Commerce Committee, and Rep. Bart Stupak (D, Mich.), chair of the subcommittee on oversight and investigations, to broaden their inquiry into Anthem's rate increases in California to include a look at rates in Indiana, where WellPoint plans to raise rates on individual coverage an average of 21%. Indiana already had Anthem executives at hearings.

Waxman and Stupak questioned WellPoint President and CEO Angela Braly Feb. 24 about the company's reasons for raising premiums. She said rates reflected underlying costs of care and a deteriorating risk pool, with older, sicker patients electing to keep insurance and younger, healthier consumers opting out.

In letters sent March 2, Waxman and Stupak asked Braly, along with the chief executives of Aetna, Humana and UnitedHealth Group, to appear at a March 23 hearing. The letter requested detailed information on the companies' treatment of members with preexisting conditions and policies about maternity coverage.

Other members of Congress also joined the fray: Sen. Max Baucus (D, Montana) and Grassley wrote a joint letter to insurers WellPoint, Aetna, Health Net, Blue Shield of California, Kaiser Permanente and UnitedHealth Group Feb. 24 requesting more information about rate increases. They asked for a response by March 23.

Sens. Russ Feingold and Herb Kohl, both Wisconsin Democrats, wrote to WellPoint March 3 to ask for an explanation for rising premiums in Wisconsin, which according to their letter are expected to increase by an average of 17.2%. "We cannot understand how these large increases in premiums are justified, and ask that you explain the rationale for placing such a heavy burden on policy holders," the letter said.

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