HHS Report: California Among Several States Seeing Premium Hikes
On Thursday, HHS Secretary Kathleen Sebelius released a report illustrating six examples of insurers that recently sought double-digit increases to premium rates for people who purchase individual coverage, the Washington Post reports.
The report is part of the Obama administration's effort to highlight the need for health reform legislation (MacGillis/Goldstein, Washington Post, 2/19).
Premiums Raised, Profits Up
Speaking at a news conference, Sebelius pointed out proposed premium increases by BlueCross BlueShield companies in six states, including California, Connecticut, Maine and Michigan, where consumers would have seen their premiums rise by 23% to 56%.
Sebelius said she was not targeting BCBS companies, adding, "Unfortunately this is pretty widespread. They are not isolated cases."
Sebelius also cited a recent report that found that the five largest U.S. health insurers last year reported $12.4 billion in combined profits. Sebelius said, "Insurance companies in the health insurance market have made 250% percent profits over the past eight or nine years. These profits are wildly excessive" (Norman, CQ HealthBeat, 2/18).
Industry Officials Respond to New Criticism
Officials from the insurance industry and congressional Republicans denounced the administration's criticism of insurers, which they described as a mischaracterization of both the problem and its solution (Washington Post, 2/19).
America's Health Insurance Plans President and CEO Karen Ignagni said, "It's time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation," adding, "Increases in the cost of coverage in the individual market shine a spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system."
BlueCross BlueShield of Michigan CEO Daniel Loepp, in a letter sent on Thursday to Sebelius, wrote, "I was disappointed to see a reference in the report you released today about BlueCross BlueShield of Michigan's rate request last year to raise rates by 56%," adding, "Without context the story is not complete. Our regulators granted us a 22% increase last year after lengthy negotiations. Despite the granting of this rate increase, BCBSM sustained losses on individual lines of business of $280 million in 2009" (Young , "Blog Briefing Room," The Hill, 2/18).
Analysts: Weak Economy Compels Insurers To Raise Rates
Some health care policy and insurance industry analysts have said that for-profit health insurers must raise premiums to protect their profit as they face a weak economy, rising costs for health care and reduced demand from companies for group policy plans, the reports.
Charles Boorady, an industry analyst with Citigroup, said, "If they are losing money, they need to raise prices."
Andrew Kurz, a former insurance executive with BCBS Wisconsin, said, "What they did is actuarially sound and totally legitimate," adding, "It's the marketplace that is wrong."
Michael Turpin, a former UnitedHealth insurance executive who now is an official at USI Holdings, said, "As competition increases in larger accounts and margins thin, there are fewer and fewer levers for insurers to pull," adding, "They're getting squeezed."
However, Boorady said WellPoint might have invited criticism by significantly raising rates during the debate over reforming the U.S. health care system (Abelson, New York Times, 2/19).
House Democrats Join Criticism of Insurers
Meanwhile, House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) and Oversight and Investigations Subcommittee Chair Bart Stupak (D-Mich.) on Thursday sent a letter to WellPoint President and CEO Angela Braly requesting further explanation of proposed premium rate increases by Anthem Blue Cross of California, a subsidiary of WellPoint (Young , "Blog Briefing Room," The Hill, 2/18).
Earlier this month, Anthem informed nearly 800,000 individual policyholders of its plan to raise premiums by as much as 39% starting March 1 (California Healthline, 2/9). Last week, Anthem announced that it would delay implementation of the rate increases until May 1, fulfilling a request by California Insurance Commissioner Steve Poizner for enough time to investigate the increases (California Healthline, 2/16). In a letter to Sebelius, WellPoint said it opted to raise rates because deductibles and copayments have not increased along with inflation, among other reasons (California Healthline, 2/12).
Waxman and Stupak rejected the company's explanations for the proposed rate increase, stating, "We request that you explain why you have asserted that declining enrollment caused by the recession justifies your exceptionally large rate increases when your own data appears to show that your enrollment is growing."
The letter added, "The data that WellPoint submitted to the National Association of Insurance Commissioners seems to paint a different picture."Waxman and Stupak have scheduled a hearing on Feb. 24 on the Anthem increase (Young , "Blog Briefing Room," The Hill, 2/18). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.