WellPoint’s New York rate hike to face scrutiny

WellPoint Inc.’s request to raise rates on small-business health plans in New York by as much as 28 percent will face increased scrutiny because of new U.S. regulations, the state’s top health insurance official said.

Federal rules released Tuesday tell state regulators to view rate-increase proposals of more than 10 percent as “initially unreasonable,” Louis Felice, head of New York’s Insurance Department’s health bureau, said in a telephone interview.

Indianapolis-based WellPoint’s Empire Blue Cross Blue Shield unit asked for premiums of 20 percent to 28 percent higher for more than 216,000 people in plans at businesses with 50 or fewer employees, Felice said. WellPoint, the biggest U.S. health insurer by enrollment, lost several rate-increase battles this year including in California, Connecticut and Maine.

In California, its request for an average 25 percent boost in premiums on plans for individuals was cut to 14 percent.

States will be able to reject insurer rate increases, while the federal government will be limited to only publishing data on the premiums, according to the U.S. Department of Health and Human Services, which is writing the rules.

State officials can choose to bar insurers with a pattern of rate increases that the law labels as “unreasonable” from new insurance exchanges that will be set up as part of funding coverage for 24 million newly insured individuals. The 10 percent threshold will change after 2011 to a state-by-state measurement based on the history of health costs in each state, according to the agency.

The insurance exchanges set up by the law that President Barack Obama signed in March will offer tax credits for people to buy private coverage by 2019. Starting this year, insurers must provide state and federal regulators with a written justification for any raised premium rates.

The administration estimates that as much as 70 percent of insurance offered in the small group and individual market will exceed the 10 percent threshold and will be subject to review.

Insurers are also subject to rules requiring the companies to spend at least 80 percent of premium revenue on patient care or rebate the difference to customers. Insurers as of 2014 won’t be able to reject people based on pre-existing conditions, and won’t be allowed to vary premiums widely based on people’s age or health status.

The rules define an “unreasonable” increase as one that lowers the percentage of premiums being spent on customers’ care below the 80 percent threshold, or that isn’t based on substantial evidence that health costs are rising, the agency said.