Health Reform Law Has Small Insurers On Edge
|By Peter Frost, Chicago Tribune|
|McClatchy-Tribune Information Services|
So when it came time for the small
That landed the company in a dubious position: a mandatory review by the
A week after the Obama administration slapped
"Believe me, we're not looking for a battle here," said
United Security, which provides health insurance for about 10,000 individuals and small groups in six states, is among three carriers in
Although the government doesn't have authority under the law to order insurers to lower rates, its ability to challenge rate hikes and publicize them provides new transparency and protection for consumers, administration officials said.
But critics say the administration's stepped-up reviews and heightened scrutiny are more about showcasing the value of the new health law in the run-up to the 2012 elections, a charge the
Some small insurers and industry observers also complain that the added scrutiny could be harmful for small and midsize carriers.
"This will capture a disproportionate amount of small group (insurers) as opposed to large group," said
Small insurers like United Security don't have the benefit of spreading risk over a large pool of customers, Laszewski said. Further, the share of premiums paid out in benefits can vary significantly year to year. As such, if a firm racks up a series of high claims in one year and loses money, it cannot seek to claw back those losses in subsequent years without coming under government scrutiny.
"When you've got smaller blocks of insurance -- 500 people here, 250 there -- how do you justify having sufficient funds to pay huge claims?" Dial said. "Just last year we had one claim that ran over
In an attempt to recoup those kinds of major losses, United Security opted to raise rates in certain pools of customers in 2012, triggering the mandatory review.
Like the federal government,
But state and federal regulators will have more power to issue sanctions starting in 2014, when state-run health insurance exchanges are launched.
The exchanges, which are projected to cover as many as 12 million consumers nationwide, will have the authority to drop or exclude health insurance plans with a history of excessive rate increases or premiums deemed too high.
The government's new power to review the rate hikes, granted by the health care law President
The administration claims that Trustmark's "excessive rate increases" would raise rates at least 13 percent for certain customers in
"Trustmark has been and will continue to be in compliance with all aspects of the Affordable Care Act."
Under the new law, insurance companies that provide small group and individual insurance policies are required to spend at least 80 percent of premium revenue on medical care. The remaining 20 percent can be used for administrative expenses and profit. If an insurer fails to meet the 80 percent threshold, it must refund its customers.
Trustmark, which blamed the rate hikes on the rising costs of hospital care, doctors services and prescription drugs, said it does not intend to alter the rates. If the company fails to spend at least 80 percent of premiums on medical care, Gallaher said, "We will, promptly and in accordance with (the law), rebate the difference to customers."
"We know there's more awareness or scrutiny on rate increases, but the things that are driving rate increases are still a reality," said
Even though employers complain about sharp increases in health care costs and insurance premiums, they're unlikely to seek the government's insight on which policy to choose, she said.
When faced with sticker shock, "There are those who will shop around, those who will say we'll have to raise employee contributions, and others who are flat-out frustrated and disgusted," Minzer said. "But are they going to be looking to (the
Nationally, health care spending grew at historically low rates in 2009 and 2010, as consumers spooked by the recession avoided visiting the doctor, taking expensive prescription drugs or undergoing costly elective procedures, according to a government report released this month. Spending growth in each of those years was less than 4 percent, marking the two lowest growth rates in the last 51 years.
Even so, health insurance costs continue to rise for many Americans, according to a September report from the
Increases of more than 10 percent, industry observers said, haven't been out of the ordinary.
Some insurers and industry observers said the administration's move to pressure Trustmark is politically motivated and likely to be followed by a rash of similar rebukes in 2012, an election year, to illustrate to voters that the new health care law is working to keep costs down.
"The Obama administration has to sell the (law) to voters, and they've got to act like they're delivering on their promise to control health care costs," Laszewski said. "This is politics."
Cohen, of the
The review process is conducted by an independent team of actuaries who are professionally bound to "call it as they see it," Cohen said.
"I don't think it benefits anybody to come out with decisions that don't stand up to scrutiny," he said. "Our only purpose is to make sure the public has the information they need to make informed decisions. The more information we can get into the hands of consumers, the better the market functions."
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