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HHS report slams insurance companies for rate hikes
The Obama administration is ratcheting up its public relations war against health insurance companies -- and hoping to breathe new life into its healthcare reform agenda -- and the latest salvo is a report condemning the industry for raising premiums during a recession while achieving record profits.
The report, which Health and Human Services Secretary (HHS) Kathleen Sebelius will unveil at a press conference Thursday, makes the administration's argument that consumers need the reforms proposed by Democrats to protect them from the current insurance market.
With healthcare reform stalled in Congress and President Barack Obama's bipartisan summit on the issue just a week away, the administration and congressional Democrats have been exploiting the Anthem case as evidence that their reforms are needed and the report highlights a few other examples of large rate increases.
Anthem Blue Cross isn’t alone in insisting on premium hikes. Anthem of Connecticut requested an increase of 24 percent last year, which was rejected by the state.3 Anthem in Maine had an 18.5-percent premium increase rejected by the state last year as being “excessive and unfairly discriminatory”4 – but is now requesting a 23-percent increase this year.5
In 2009, Blue Cross/Blue Shield of Michigan requested approval for premium increases of 56 percent for plans sold on the individual market.6 Regency Blue Cross Blue Shield of Oregon requested a 20-percent premium increase.7 UnitedHealth, Tufts, and Blue Cross requested 13- to 16-percent rate increases in Rhode Island.8 And rates for some individual health plans in Washington increased by up to 40 percent until Washington State imposed stiffer premium regulations.
Democrats on Capitol Hill intend to keep these premium increases in the news for as long as possible. During a conference call with reporters Wednesday, Rep. Chris Van Hollen (D-Md.), chairman of the Democratic Congressional Campaign Committee and assistant to House Speaker Nancy Pelosi (D-Calif.), said the Anthem increase is "exhibit A that we can expect more of the same."
The day before Obama's summit, the House Energy and Commerce Committee's Oversight and Investigations Subcommittee plans to hold a hearing on Anthem.
"These massive increases are disturbing examples of the problems that make reforming our health insurance system more important than ever," the HHS report says. "Leading experts have predicted that, without reform, these increases will continue, and the federal government and most states don’t have the legal authority to block or reduce health insurance rate increases."
The report highlights a few of the health insurance market reforms including prohibitions on denials based on pre-existing conditions, higher premiums for women, forbidding a lifetime limit on health benefits, requiring insurance companies to spend a certain percentage of premiums on medical claims not other expenses, the creation of a health insurance exchange marketplace, and the availability of subsidies for low- and middle-income people.
WellPoint and other insurers maintain that their premiums increases reflect rapidly rising healthcare costs. The HHS report rejects that argument and counters that "some of the premium increases requested by insurance companies are 5 to 10 times larger than the growth rate in national health expenditures." Moreover, the report notes, the biggest companies in the business have done pretty well over the past 10 years.
Recent economic data show that profits for the ten largest insurance companies increased 250 percent between 2000 and 2009, ten times faster than inflation.12,13 Last year, as working families struggled with rising health care costs and a recession, the five largest health insurance companies – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in combined profits of $12.2 billion, up 56 percent over 2008.14 These health insurance companies’ profits grew even as nominal GDP decreased by 1 percent over this same time period.
The insurance industry maintains that its profits are reasonable and that an average profit margin around 3 percent to 5 percent should not be viewed as a major reason for growing national healthcare spending.
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