Dem lawmakers want answers on health insurance rates

More than 100 Democratic lawmakers are demanding that the health insurance industry explain reports that companies are raising rates sharply in advance of President Barack Obama's healthcare overhaul.

The industry has already drawn the ire of Democratic legislators during the healthcare debate, most notably when its trade association, America's Health Insurance Plans, released a study critical of healthcare legislation the day before a key committee vote.

The letter is addressed to the trade group and its president and CEO, Karen Ignani. The letter says insurers are proposing to increase premiums for customers across the country by an alarming 15 percent, double the rate of increase from last year. It says such increases will stunt job creation and economic growth as the nation tries to dig itself out of a recession.

"Small businesses and hard-working Americans deserve to know why they will be subjected to such unusual and significant increases in health care premiums," the letter said, "and we ask that you submit to Congress a detailed explanation of the planned rate hikes."

The insurance group responded that the increases are in line with the rising costs of medical care, and say changes are needed in the system to bring down costs.

“According to the federal government, premium increases mirror increases in the cost of medical services," AHIP spokesman Robert Zirkelbach said in a statement. "In every state, health plans must provide actuarial justification for any changes in premiums. To make health care more affordable and put the system on a sustainable path, reform must address the root causes of rising medical costs.”

AHIP criticized the House-passed version of the bill, saying that it failed to contain costs, or "bend the cost curve," and that the public health insurance option in the bill would cause millions of people to lose their existing coverage.

AHIP commissioned a study of a Senate Finance Committee version of the bill that said there were several provisions that could cause people's insurance premiums to rise. Critics said the study ignored other aspects of the bill that would lower premiums.

The letter, spearheaded by Rep. Joseph Crowley (D-N.Y.), the head of the business-minded New Democrats, has the signatures of 88 House members and 31 senators, according to a Democratic aide.

Text of the letter after the jump:

November 18, 2009
Karen Ignagni
President & CEO
America’s Health Insurance Plans
601 Pennsylvania Ave
South Building, Suite 500
Washington, DC, 20004
Dear Ms. Ignagni,
We read with great concern the October 24, 2009 New York Times article, “Small Businesses Face Sharp Rise in Costs of Health Care.” The article raises serious allegations about whether insurance companies are raising rates in anticipation of health reform being enacted by President Obama and Congress.  Small businesses and hard-working Americans deserve to know why they will be subjected to such unusual and significant increases in health care premiums, and we ask that you submit to Congress a detailed explanation of the planned rate hikes.
As you know, next year, health care providers are proposing to increase premiums for customers across the country by an alarming 15 percent—double the rate of increase from last year. For America’s small businesses, this means the annual premium per employee will have risen from $4,500 in 2008 to $5,500 in 2010 – an increase of $1000 per employee in just two years.  Small businesses are the backbone of the U.S. economy, accounting for approximately 80% of net new jobs created.  During this economic downturn, they cannot be expected to absorb such skyrocketing costs without negative consequences for job creation and business growth.
Already, the number of employers providing insurance to their workforce is slipping.  For example, over the last ten years, the percentage of small businesses (with fewer than ten workers) offering health benefits has dropped from 56 percent to 46 percent. If we continue on the current path, U.S. businesses – large and small – will have to choose between reducing benefits or making layoffs in an effort to stay competitive with foreign competitors.  Without health care reform, small employers are on track to pay nearly $2.4 trillion for health care in the next 10 years.  As a result, one in five employers is expected to stop offering health benefits within the next five years.  The employer-sponsored health insurance of millions of employees and their families is at stake.
U.S. businesses and hard-working Americans are struggling enough to make ends meet. Clearly, they cannot afford baseless premium hikes.  That is why it is so important for you to explain the cause for these premium hikes.  We look forward to your response and to getting to the bottom of this issue.