On November 21, 2011, the U.S. Department of Health and Human Services (HHS) publicly announced for the first time that a carrier—Everence Insurance—is charging small businesses unreasonably high premium increases. In doing so, HHS is complying with its May 19, 2011 final regulations which stipulate that, beginning September 1, 2011, there must be a review of any proposed increase of 10 percent or more for individual and small group health insurance plans that meet certain criteria listed under §154.200 of the federal regulations. The regulations stem from a requirement in the Patient Protection and Affordable Care Act (ACA) that HHS, in conjunction with the states, establish a process for annual review of “unreasonable” rate increases for non-grandfathered health plans.
The 12-percent premium increase proposed by Everence Insurance of Pennsylvania was found unreasonable in part because the company determined its rate using assumptions based on national data rather than state data. HHS cannot force companies to change their premiums1. However, if they do not withdraw the rate increase, they are required to submit a justification for the higher rate and post it online.
1Only states can approve or reject unreasonable or excessive rate increase, if the state laws give the state regulator this authority.
