A federal official in charge of insurance oversight on Monday blasted the Connecticut Insurance Department for approving “extremely large” premium increases for the insurer Anthem, and called on the department to hold a hearing on the changes.
“The consumers of Connecticut expect and deserve transparency and a fact-based rationale as to why their rates are increasing,” Jay Angoff, director of the Department of Health and Human Services’ Office of Consumer Information and Insurance Oversight, wrote in a letter to state insurance Commissioner Thomas Sullivan.
Angoff noted that the insurance department received a $1 million federal grant to improve its oversight of insurance company rates and determine whether proposed increases were excessive.
When seeking the grant, Angoff wrote, the department proposed using the money to contract with consultants to test proposed rates, hire people to hold more rate hearings and publish information online including the insurers’ justification for increases, insurance department analysis and correspondence between the insurers and the department.
“HHS is therefore surprised that, after being awarded this grant, the CID has approved a substantial increase by Anthem Insurance Company without holding a public hearing, without having tested or validated the proposed rates and the assumptions underlying those rates, and without publicly disclosing any data filed by Anthem, analysis done by the CID, or correspondence between the CID and Anthem,” Angoff wrote.
In a response, Sullivan noted that the department has not yet received the $1 million in grant money, although a federal official said that the money has been available to the state since Aug. 16.
Sullivan cautioned against comparing health plans that offer different benefit packages. Some plans were required to offer new or expanded benefits to comply with the health reform law.
“In my view, such a comparison does not address the very important point that comprehensive benefit packages cost more than those plans offering minimal coverage,” Sullivan wrote.
As an example, he cited one of Anthem’s prescription drug benefits, which limited coverage to $500 a year. Under the health reform law, the limit was increased to $750,000, resulting in a nearly 23 percent increase in the cost of the plan.
In addition to holding a hearing, HHS asked the insurance department to test and validate the assumptions behind the increase it approved and make public data from Anthem, analyses of the proposal and correspondence between the department and Anthem.
Sullivan wrote that the department will begin the processes it described in the grant application “as soon as the Department receives its grant money.”
The department has started working with state resources to be able to post filings on its website, Sullivan wrote, adding that copies are now available in paper and electronic form and have been made available to anyone who asks for them.
“We are also happy to accept comments from anyone regarding those filings, just as we received your comments,” he wrote.
Sullivan wrote that he takes his authority to regulate insurance “very seriously,” and wants to make sure that health plans are competitive and able to meet policyholders’ needs in coverage and price.
“Therefore, all rate increases which accompany benefit filings receive a thorough actuarial analysis to determine if they are in line with the benefit changes being implemented,” Sullivan wrote. “As a former state insurance regulator, you yourself are aware of the inescapable correlation between the benefits provided and the rates needed to cover those benefits.
Health insurance rate increases have been under close scrutiny by consumer groups and state and federal officials as the first provisions of the Patient Protection and Affordable Care Act take effect.
Angoff cited analyses by Anthem and others that suggested the health reform law would have modest impacts on insurance rates.
“The Affordable Care Act cannot be used to justify this huge rate hike and, in fact, includes provisions to empower states to shed light on and guard against this type of excessive insurer behavior,” he wrote.
The effect of the health reform changes on insurance costs has been a matter of intense debate. HHS Secretary Kathleen Sebelius has cited research suggesting that health reform changes would lead to “minimal” effects on premiums – between 1 and 2 percent.
Insurers have argued that some of the cost increases related to the health reform law stem from enhanced coverage. New policies are no longer allowed to place limits on the lifetime benefits a person receives, and some lower cost insurance policies had those limits.
Connecticut Attorney General Richard Blumenthal has criticized rate increases the insurance department has approved, warning that the increases could push premiums out of reach for families. Blumenthal cited a lack of information from the insurers and called on the department to reconsider the increases.
The Connecticut State Medical Society has called for state lawmakers to overhaul the state process for reviewing insurance rates. A bill that would have done so was introduced during this year’s legislative session and passed the in House, but was never put to a vote in the Senate.
“Businesses and individuals are struggling to pay for health insurance and physicians are being hassled and squeezed by these same insurers,” Matthew C. Katz, the medical society’s executive vice president, said in a statement. “Yet we are supposed to believe that these giant corporations are going to suffer when they have to meet benchmarks for the amount of medical care provided for every dollar they bring in. Without evidence, it’s a case of crying wolf.”
Katz added that any suggestion that costs are rising because doctors are being paid more is a red herring.
The Universal Health Care Foundation of Connecticut released a statement from its president, Juan Figueroa, criticizing both insurers and Sullivan. Figueroa said Sullivan rubber stamped the increases, “in the process making our state government complicit in this outrageous anti-consumer move.”
“To allow insurance companies to arbitrarily raise rates in a brazen attempt to undermine health reform is unconscionable,” Figueroa said. “It should not go unchallenged.”