Pennsylvania’s nine largest health insurance companies are going under the microscope of state officials, who will explore the genesis behind “a pattern of controversial rate increases.”

Ed Rendell

Gov. Ed Rendell announced today (June 9) that the Pennsylvania Insurance Department will investigate its biggest health providers “to determine the reasons behind a pattern of controversial rate increases, and especially the extent to which those increases are driven by the use of questionable health profiling tools,” according to a statement.

The companies in the review are: Highmark (controlling 27% of the market by premiums); Independence Blue Cross (25%); Aetna (6%); Coventry (6%); University of Pittsburgh Medical Center (5%); Capital Blue Cross (5%); UnitedHealthcare (5%); Geisinger Insurance Group (3%); and Blue Cross of Northeastern Pennsylvania (2%).

Rendell said that federal health reform is providing many opportunities for private insurers, beginning with 32 million new customers.

“So I am disappointed to see these companies hiking premiums for those most in need of health care, especially when they know that all discrimination against sick people will be prohibited in 2014 under the federal reform law,” he said.

The announcement comes as the U.S. Department of Health and Human Services announced $51 million in grants to aid oversight of insurance premiums and rate hikes to states demonstrating a need for the assistance. Rendell’s office said the state will apply for such a grant by the July 7 deadline.

Officials said Pennsylvania “has some of the weakest protections” nationwide against rate increases for small businesses, with no cap on rate increases due to someone in the group suffering from a serious health condition. Under federal reform, in 2014, health insurance exchanges will allow individuals and small businesses to purchase coverage prohibiting any premium differences based on health status.

“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.”

Joel Ario, the state’s insurance commissioner, said recent market surveillance work, including a PID survey and broker reports, “suggest that some companies are expanding the use of individualized medical questionnaires and drug profiling in the small group market.”

Ario noted that the state’s two largest health insurers – Highmark and Independence Blue Cross – do not use the tools, but the other companies do. He noted that the state “expected to see some improvement” upon securing a commitment from Highmark on its previously announced intent to introduce medical questionnaires in the small-group market.

“Instead, we’ve seen increased competition to identify and drive premiums up for the most vulnerable groups,” the commissioner noted.

Rendell added that stories from disadvantaged residents of Pennsylvania are “heartbreaking,” and is urging the General Assembly to give the PID authority to stop unnecessary rate increases, “or we’ll likely see a lot more disruption between now and 2014.”

Independence Blue Cross responded to news of the investigation. “We do not know the details of the investigation, which was just announced Wednesday. However, we are pleased that the governor’s announcement pointed out that we do not engage in medical underwriting in the small-group market.”

Other health insurers contacted by IFAwebnews.com had no immediate comment on the state’s investigation.