The Obama administration got a decent amount of attention Monday when it took one of its new health-reform powers out for a spin and declared a double-digit premium increase to be “unreasonable.”

The increase in question came from the Everence Association in Pennsylvania, which wanted to raise premiums by 12 percent. Under the health reform law, all double-digit rate increases are subject to additional, regulatory review. And although the federal government cannot reject a rate hike it deems “unreasonable,” it does have the bully pulpit: In a call with national reporters Monday, HHS Secretary Kathleen Sebelius urged Everence to withdraw its proposed increase.

But in the administration’s big announcement, here’s what got less attention: In four other states, regulators found double-digit premium increases to be completely reasonable, justified by the paperwork that insurance companies submitted. That ranges from an 11 percent bump in Montana to an 18 percent rate hike in Iowa.

Can an 18 percent rate increase really be reasonable? Regulators say it can. Gundersen Lutheran Health Plan got the sign-off for that rate hike largely because of the higher costs of the medical services it expects to cover. The plan won’t raise cost sharing for its members but, with increases in not only the cost of medical care, but also how much each individual uses, it sees costs rising dramatically in 2012.

A similar story in Montana: There, federal reviewers determined an average rate increase of 11 percent for a 5,111- member plan to be justified. There, all of the rate increase would go to cover increased medical costs; the plan would actually drop profit by about 6 percent per member.

To be sure, these increases likely don’t feel reasonable to American families. Insurance premiums have skyrocketed, wiping out any additional income gains over the past decade:


With health costs going up like that, insurance companies make for an easy culprit; they are, after all, the guys delivering the big bills and rate hikes. And, sometimes, they do push up rates up in ways that are not justified.

But, on the balance, insurance companies don’t make fantastic villains. Their profit margins usually hover around 5 percent. And what regulators have essentially said in these reviews is that they’re not to blame for the rising premiums. Health insurance cost are growing because medical costs are growing. The more difficult math problem is how to reduce those medical costs, and curb the constantly growing cost of health insurance.