HHS Secretary Kathleen Sebelius has announced that health insurance premium increases in nine states are “unreasonable” under the rate review authority granted by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), which requires insurance companies to justify rate increases of 10 percent or higher.

The announcement was made after HHS determined, based on independent expert review, that two insurance companies have proposed unreasonable health insurance premium increases in Arizona, Idaho, Louisiana, Missouri, Montana, Nebraska, Virginia, Wisconsin, and Wyoming. The rate hikes would affect over 42,000 residents across these nine states. Sebelius has called upon these companies to immediately rescind their unreasonable rate hikes, issue refunds to consumers or publicly explain their refusal to do so.

New rate review report issued by HHS

Sebelius also released a new rate review report showing that, six months after HHS began reviewing proposed health insurance rate increases, health insurers have proposed fewer double-digit rate increases and states have begun to take an active role in reducing rate increases. In fact, since March 10, 2012, the justifications and analysis of 186 double-digit rate increases for plans covering 1.3 million people have been posted at HealthCare.gov, resulting in a decline in rate increases. In the last quarter of 2011 alone, according to the report, states have reported that premium increases dropped by 4.5 percent, and in states like Nevada, premiums actually declined.

In these nine states, the insurers have requested rate increases as high as 24 percent. HHS has deemed these increases unreasonable because the insurer would be spending a low percentage of premium dollars on actual medical care and quality improvements and because the justifications of the insurers for the premium increases were based on unreasonable assumptions.

It should be noted that most rates are reviewed by states and many states have the authority to reject unreasonable premium increases. In addition, since the passage of PPACA, the number of states with this authority has increased from 30 to 37, with several states extending existing “prior authority to new markets. The HHS report also shows that:

• Texas, Kentucky, Nevada and Indiana are reporting fewer requests for rate increases over 10 percent;

• California, New York, Oregon, and many others, have proactively lowered rate increases for their residents; and

• the rate review program has made insurance companies explain their increases, and more than 180 have been posted publicly and are open for consumer comment.