HHS rate review unfairly targets small insurers

Small health insurance companies are worried that the federal government's increased scrutiny over premium increases could run them out of business, reported the Chicago Tribune.

The Department of Health & Human Services (HHS) already has targeted two small insurers--Everence Insurance and Trustmark Life Insurance-- for "excessive" rate increases as a result of the agency's new rate review program established under the health reform law.

Consequently, small insurers like United Security Life and Health Insurance fear they may become the next HHS target. Along with Assurant Health subsidiaries John Alden Life Insurance and Time Insurance, United Security is on the HHS review list.

"Believe me, we're not looking for a battle here," Robert Dial, United Security's vice president and chief compliance officer, told the Tribune. "We have to do what we feel is necessary in order to basically survive. We're not at war, we're just trying to exist. We're just trying to stay in the business."

The problem for small insurers is they can't spread risk over a large pool of customers like the big insurers can. Plus, because their share of premiums that are paid out in benefits varies significantly each year, if they incur several high claims in one year, they can't recoup losses through subsequent rate hikes without undergoing an HHS rate review.

"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 $1.6 million."

Like United Security, Assurant Health is concerned with the increased scrutiny its plans are facing. "We know there's more awareness or scrutiny on rate increases, but the things that are driving rate increases are still a reality," Assurant Health spokeswoman Susan Burkee told the Tribune. "We're hoping that (regulators) will look at the data we're supplying them and come to the same conclusion."

To learn more:
- read the Chicago Tribune article