HHS Deems Insurance Premium Hikes in 9 States Excessive

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.

Weekly Round Up

This week, President Obama signed the “Middle Class Tax Relief and Job Creation Act of 2012” into effect, extending the payroll tax cut through the end of the year. In other news, The United States Supreme Court decided to remand the California Medicaid rate case back to the Ninth Circuit Court. Also this week on Health Wolters Kluwer:

  • Wyoming’s state Senate considers extending deadline to form health exchange.
  • HHS announced the Strong Start Initiative, which aims to reduce premature births.
  • Rule includes agent compensation in medical loss ratio formula.
  • FDA request for increased budget to be largely funded by user fees.
  • Increasing numbers of doctors and hospitals are using health information technology.
  • Health care fraud enforcement efforts recovered $4.1 billion last year.

Is Wyoming Too Small For an Effective Health Insurance Exchange?

The federal health reform law, the Patient Protection and Affordable Care Act (PPACA)  (P.L. 111-148), requires that all states develop health insurance exchanges by 2014. The exchanges serve as online marketplaces for individuals and small businesses to shop for health insurance, allowing consumers to evaluate and compare various plans that meet minimum benefit standards defined by PPACA. The idea is that health insurance companies will have to be more transparent and the more competitive platform will encourage them to provide consumers with better products. States have until January 1, 2013 to develop a framework for their own exchanges; otherwise, the federal government will implement a default exchange program for them.

There have been concerns raised as to whether an exchange is truly feasible in a state like Wyoming, which boasts the smallest population in the United States with 563,000 people. Bill Landen, a State Senator and member of the Wyoming Health Benefits Exchange Steering Committee, stated, “I have some real reservations about whether or not we could make an insurance exchange self-sustaining…We have an older population. We have a population that works on farms and ranches and oil rigs.”  Nonetheless, the Committee has recommended that Wyoming develop its own exchange in lieu of setting up a regional exchange with neighboring states or defaulting to the government program.

Wyoming desires to maintain its independence and unique ways of doing things. Landen pointed out the difficulties of implementing a regional exchange with other states, which have processes and rules dissimilar to those of Wyoming and may be reluctant to include the state’s small, aging population in their risk pool. As a state largely opposed to federal health care reform, it goes without saying, the idea of allowing the federal government to set up the program is largely unpopular. Like the Committee, Governor Matt Mead opposes federal intervention, stating that Wyoming would “cede substantial authority” over its insurance markets and the Medicaid eligibility process.

Exchange opponents point out that the state’s small risk pool will result in higher costs being passed on to Wyoming consumers compared to other states. Since administration costs are also distributed among enrollees, the smaller number of enrollees may result in higher fees for Wyomingites.

Another issue raised is the tendency of Wyoming residents to seek care in surrounding states due to the lack of physician specialists in the state. Since the state’s small population is spread out over such an expansive geographic region, residents currently may have to drive 70 miles to receive care. It is not uncommon for patients to seek cheaper care in larger cities in neighboring states such as Denver and Salt Lake City. According to Elizabeth Hoy, the health care policy advisor to Governor Mead, “There’s infrastructure that can’t be built in Wyoming because people go out of state…It may be important that whatever product we sell, we sell across state lines.”

Governor Mead has received criticism for embracing the Committee’s recommendation to establish a state exchange program since he has included Wyoming in the 25-state lawsuit seeking to repeal PPACA and its exchange requirement, which will be heard this spring by the United States Supreme Court. Mead defends his position, stating that if PPACA is not repealed, Wyoming is still required by federal law to establish the exchange or face federal interference. He wrote, “For these reasons, I strongly support the committee’s recommendation that Wyoming move forward with establishing some components of a state-run benefits exchange and that these efforts be as transparent as possible.”

On February 15, 2012, a state Senate committee voted to advance a bill to the full Senate that gives the legislature an extension of time to decide whether the state should establish its own exchange.

West Virginia Joins States’ Trend of Requiring Autism Coverage, Amends Legislation

West Virginia passed legislation in 2011 that will require insurers, both private and public, to cover applied behavioral analysis which is a treatment for many autism spectrum disorders. However, many flaws have been discovered in the language regarding coverage limits, including age and spending limits, which make execution of the law difficult. Additionally, language had been included in the final draft of the law that was supposed to be removed prior to its passage. The state’s legislation announced on January 23, 2012 that it had initiated a course of action to address the mistakes.

Approximately one in 110 American children is diagnosed with autism, a developmental disorder that prevents a child’s brain from developing normally in areas affecting communication and social skills. While a cure has not been discovered, early intervention treatments have proven to manage the disorder’s symptoms. Many parents contend that the therapeutic needs of their children are not sufficiently met in the public school system, so they are forced to seek treatments outside of school. Such treatments, including applied behavioral analysis, can be expensive, costing some families upwards of $50,000 annually.

The recent trend, adopted by 26 states, including West Virginia, mandate insurers to cover autism treatment. Some other states have passed legislation requiring more restricted coverage of the disorder under mental health parity laws. The only states remaining that have not addressed the issue in some fashion are Oklahoma, Utah and Wyoming. Ron Ashworth, the Board Chair for Sisters of Mercy Health Systems, is an advocate of autism coverage for both social and economic reasons. He states, “…without early treatment, the cost to society is immense–over $100,000 per individual. The cost of insuring for autism is much less than not insuring.” Advocates maintain that coverage will not greatly inflate the cost of insurance premiums, if at all, while it reduces the chance that autistic children will grow to be non-productive adults who are a greater financial burden on taxpayers.

Some disagree, including the Council for Affordable Health Insurance, which estimates that insurance premiums may go up one to three percent by mandating insurers to cover autism spectrum disorder-related treatments. Challengers of the mandate argue that parents of children affected by autism and even their school districts need to assume responsibility for autism treatment and that mandating coverage interferes with the free market. Others contend that many treatments for autism are investigational and experimental, making it inappropriate to require coverage.

While its passage may be controversial, West Virginia Acting Governor, Earl Ray Tomblin, takes pride in the passage of the state’s mandate and recognizes the difficult five year-long lobbying process by parents of autistic children and other advocates. Tomblin stated, “I feel these families’ pain and am happy to be a part of improving their lives…It is my hope that this legislation will bring opportunities for a better life to our children with autism and their families…”