WASHINGTON — 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 health-care law for the first time to pressure insurers to minimize premium increases.
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 percent 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 review would be “the first of many” to come.
Indiana-based Everence stood by the rate increase and disputed the federal government’s analysis.
“We have no plans to make any changes,” said spokeswoman Judy Martin Godshalk. The company would welcome a discussion with federal regulators, she said.
The health-care overhaul that Obama signed last year does not give federal or state insurance regulators any new authority to prohibit rate hikes.
But the law allows government officials to require insurers seeking high increases to justify them publicly, 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 blocking rates they deem excessive.
The Obama administration earlier this year announced it would review any rate increase above 10 percent in states that do not have the capacity to do reviews themselves.
The Department of Health and Human Services is currently reviewing 35 such increases.
They have already determined that an 11 percent increase that Everence is imposing in Montana is reasonable.
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