Jan. 12 (Bloomberg) -- Trustmark Life Insurance Co. raised premiums for about 10,000 people covered by health plans in five states at an “unreasonable” rate, the Obama administration said.
The closely held company increased the price for plans in Pennsylvania, Arizona, Alabama, Virginia and Wyoming by at least 13 percent, the Department of Health and Human Services said in a statement today.
Insurers are required by the 2010 health-care overhaul to explain rate increases exceeding 10 percent to state and federal regulators. Lake Forest, Illinois-based Trustmark’s new prices will result in the company spending a low percentage of premium revenue on customer care and quality improvements, the government said.
“It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so,” HHS Secretary Kathleen Sebelius said in a statement.
Trustmark’s premiums are driven by the rising cost and increased use of medical services, the company said in a statement.
“As a smaller carrier, our loss ratios can vary significantly from year-to-year, and we take that volatility into consideration,” the company said in the statement.
Singling out Trustmark for criticism is “foolishness,” said Robert Laszewski, a consultant in Alexandria, Va. with 20 years’ experience in the insurance industry.
The small-business markets in which the company sells plans are competitive, he said, and firms buying coverage almost always use brokers to shop among insurers. Trustmark serves as a counterbalance to large insurers such as UnitedHealthGroup Inc. and WellPoint Inc., Laszewski said.
“If they want to knock the Trustmarks out of the business, this is the way to do it,” he said in a phone interview. “What they’ll be left with is an oligopoly. The big guys will be the only ones left and then you won’t have competition.”
The company is not a client, he said.
State and federal regulators can’t force the insurer to drop the higher premiums.
In November, Sebelius called on a Pennsylvania insurer, Everence Insurance Co. of Goshen, to rescind an average 12 percent increase the government called unreasonable. Everence declined, saying it disagreed with the U.S. finding. The new rates took effect on Oct. 1.
To contact the reporter on this story: Alex Wayne in Washington at email@example.com
To contact the editor responsible for this story: Adriel Bettelheim at firstname.lastname@example.org