Reacting to a consumer complaint about unusually high health insurance premiums, the District of Columbia Department of Insurance, Securities and Banking (DISB) rescinded its approval of a rate increase proposed by CareFirst after discovering a filing error by the regional insurer.

An order rescinding the prior approval, issued to the Owings Mills, Md.-based insurer March 3, states that health insurance premiums for affected customers will revert to their previous rate until CareFirst files and receives approval for a revised rate. The new rate can take effect 90 days after CareFirst notifies subscribers.

The order also provided for a refund of any overpayments plus interest.

Gennet Purcell

Citing the regulatory action’s occurrence during National Consumer Protection Week, DISB Commissioner Gennet Purcell said her agency “has pursued regulatory measures that keep on protecting consumers’ financial interests.

“Residents can make a difference when they file complaints with the agency, even if they only suspect that the activity is unfair, abusive or excessive,” she said in a statement.

CareFirst’s filing for the individual, non-Medigap indemnity health insurance policy through its subsidiary, Group Hospitalization and Medical Services (GHMSI), was initially approved by the DISB in October 2009, where the increased rate was to take effect Jan. 1. The DISB said based on a complaint by one consumer earlier this year, the agency’s staff requested additional documentation from CareFirst, realizing “it did not meet specific requirements to warrant such an increase.”

The agency said due to “an administrative error” on the part of the insurer, an incorrect ratio was used to approve the 35% rate increase and without that error, the information in the rate filing would not support the requested increase.

The order states that GHMSI did not incorporate the premium rates approved by the DISB in 2009 for the Comprehensive Major Medical coverage into its administrative system, resulting in affected subscribers being charged the prior year’s premium rates.

The error caused the loss ratio for the product subject to the filing to be higher than CareFirst had charged the correct premium, the order states. Purcell subsequently rescinded the rates in her March 3 order.

CareFirst did not immediately respond to a request for comment by IFAwebnews.com on the rescinded rate or the administrative error cited by the DISB.

District regulators said as of March 7, the rates approved last October are no longer in effect and CareFirst should continue charging individuals at the rates they paid prior to Jan. 1, 2010, and should also refund any amount charged in excess of the rates with interest at 5% on the excessive amounts charged.

DISB officials are still in the process of determining whether the reserves of GHMSI were “unreasonably large,” and thus a violation of District law. The decision, which was supposed come by the end of 2009 was delayed to “a later date.”

A DISB spokesperson told IFAwebnews.com there is no news or timeline regarding the reserve determination by Purcell.