The Obama administration Monday called on a health insurance company in Pennsylvania to reduce what it is charging small businesses, 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 determined that Everence Insurance Co.'s plan to raise rates on about 5,000 people in Pennsylvania by nearly 12% next year is unreasonable.
That rate is not justified by what the insurer was expected to pay out in medical claims in the state, said Secretary of Health and Human Services 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" to come.
A spokeswoman for Indiana-based Everence said the company would respond later Monday.
The healthcare overhaul law that 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 it allows government officials to require insurers seeking high increases to publicly justify them, a move that proponents hope will persuade companies to think twice about proposing excessive hikes.
Insurance premiums have historically been regulated by state governments. But oversight has varied substantially from state to state, with some doing almost no review and some actively blocking rates they deem excessive.
The Obama administration this year announced it would review any rate increase above 10% in states that do not have the capacity to do reviews themselves.
The Department of Health and Human Services is reviewing 35 such increases. And administration officials have completed two, including the Everence rate hike in Pennsylvania.
They have already determined that an 11% increase that Everence is imposing on customers in Montana is reasonable.
Another 77 rate hikes of more than 10% are being reviewed by state regulators around the country, according to the Department of Health and Human Services.