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CMS Announces More Small Health Plans with 'Unreasonable' Proposed Rates

By John Reichard, CQ HealthBeat Editor

April 16, 2012 -- A Centers for Medicare and Medicaid Services official recently announced that two insurers in five states have proposed rate hikes that are "unreasonable."

The insurers, Time Insurance Company, a unit of Assurant Life, and United Security, will be able to charge the rates, which consist of increases ranging from 12 percent to 22 percent. But they must state on their websites and on the CMS website that reviewers have found the rates to be unreasonable and explain why they are imposing them anyway.

Health and Human Services Secretary Kathleen Sebelius said in a news release that it's time for the companies to "immediately rescind" the rate hikes, "issue refunds to consumers or publicly explain their refusal to do so."

The announcement is part of the ongoing effort by CMS to highlight health law provisions intended to benefit consumers.

The number of enrollees in the plans announced last week total 46,087. In the case of the United Security rates, Gary Cohen, director of the Oversight Group in the CMS Center for Consumer Information and Insurance Oversight, the rates were both "unreasonable and unjustified," he said in a press call.

"That means that those increases not only are excessive, but also that they failed to provide sufficient information to us to determine whether their proposed increase was based on sound data," Cohen said.

Assurant Health said in a statement that "We maintain our recent rate filings are actuarially justified and appropriate.

"Our premium rates are based on sound actuarial practices, backed by decades of experience and expertise in the individual and small group markets. Assurant Health uses medical trend data that factors in both the rising cost of health care and the utilization of medical services and prescription drugs by our customers in determining premium rates."

CMS has authority under the health care law (PL 111-148, PL 111-152) to decide whether premium increases of more than 10 percent in the individual and group markets are unreasonable. It named Time Insurance Company in a separate announcement in late March as charging unreasonable rates.

Cohen said the rate review provisions are also having an impact on insurance companies that cover tens of millions of Americans. Because of the rate review provisions of the health law, they are either charging lower rates to begin with or are scaling back the increases they originally said they would charge, Cohen said.

Cohen cited rates levied by Time Insurance Co. in Louisiana, Montana, Missouri, Nebraska and Wyoming. The United Security plans are in Arizona and cover 340 people.

Sebelius said that "thanks to the Affordable Care Act consumers in every state are getting a straight answer from insurance companies who raise their rates by 10 percent or higher."

Cohen said that the number of states with some authority to reject unreasonable rate hikes has risen from 30 before the health law to now 37. The law provided funds to states to beef up rate review if they obtained authority from their state legislatures to reject hikes deemed unreasonable.

Cohen said CMS is sending letters to the other 13 states noting the availability of the funds.

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