Pennsylvania Gov. Edward G. Rendell announced Wednesday he will investigate the state's nine largest health insurance companies to determine the reasons behind "a pattern of controversial rate increases."
Rendell said he believed the increases may have been driven by the use of "questionable health profiling tools."
"Federal health reform brings many opportunities for health insurance companies, starting with 32 million new customers," Rendell said. "So I am disappointed to see these companies hiking premiums for those most in need of healthcare, especially when they know that all discrimination against sick people will be prohibited in 2014 under the federal reform law."
Earlier this week, Department of Health and Human Services Secretary Kathleen Sebelius announced a new $51 million grant program, funded by the Affordable Care Act, to help states strengthen oversight of insurance premiums and rate hikes.
Rendell said Pennsylvania plans to apply by the July 7 deadline to receive the starting grant of $1 million. The grant program allows for an addition $250 million a year over the next five years.
"We need a smooth transition into 2014, but instead, we are seeing some truly exorbitant rate increases -- with some small businesses seeing annual increases in excess of 50 percent," Rendell said. "This level of increase is not about passing on increases in health spending, which average in the 5 percent to 10 percent range; this is about companies trying to get the highest possible rates before the federal reforms take effect."
Pennsylvania Health Insurance Commissioner Joel Ario said recent market surveillance work, including a department survey and reports from brokers, suggest that some companies are expanding the use of individualized medical questionnaires and drug profiling in the small group market.
"The two largest health insurance companies, Highmark and Independence Blue Cross (IBC) do not use these tools, but the next seven largest insurance companies all do," Ario said.
"We expected to see some improvement last month when we secured Highmark's agreement to hold off on its previously announced intent to introduce medical questionnaires in the small group market," Ario added. "Instead, we've seen increased competition to identify and drive premiums up for the most vulnerable groups."
According to Ario, Pennsylvania has some of the weakest protections in the nation against rate increases for small businesses, with no cap on rate increases simply because someone in the group has a serious health condition. He added, however, the law will change in 2014 when individuals and small businesses can buy health insurance through exchanges that will prohibit any premium differences based on health status.
"The stories coming in from disadvantaged groups are heartbreaking," Rendell said. "I urge the General Assembly to give the commissioner the authority needed to stop these rate increases, or we'll likely see a lot more disruption between now and 2014."