Insurers push back on HHS premiums report

The health insurance industry isn't taking attacks from the Obama administration lying down.

The Department of Health and Human Services (HHS) issued a report Thursday slamming health insurance companies for jacking up premiums and contending that the administration's reform platform is the key to reining in the industry.

But America's Health Insurance Plans (AHIP), the trade group that represents the industry, says not only that its members' premium hikes are merely a reflection of the escalating costs of medical care but that the Democratic proposals on the table won't fix the real problem.

“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," AHIP President and CEO Karen Ignagni said in a statement. “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.  If reform doesn’t address these pieces, it will not solve the serious problems that individuals, families, and employers face. That is why health plans have proposed fundamental reform of health insurance markets and a long-term strategy to reduce rising health care costs."

UPDATED 5:10 p.m.

Blue Cross Blue Shield of Michigan, one of the companies identified in the HHS report, is pushing back on its own. In a letter sent to Sebelius Thursday, Daniel Loepp, the company's president and CEO, says the secretary painted an unfair picture.

"I was disappointed to see a reference in the report you released today about Blue Cross Blue Shield of Michigan's (BCBSM) rate request last year to raise rates by 56 percent. Without context the story is not complete. Our regulators granted us a 22 percent 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," Loepp wrote.

Meanwhile, Sebelius is not the only official in Washington criticizing the company's actions. , Michigan Republican Rep. Dave Camp, the ranking member of the Ways and Means Committee, singled out his home-state insurer on Twitter saying, "The reported premium increases are unacceptable." Camp, however, went on to charge that the healthcare reforms proposed by Democrats would make the problem worse.

Read AHIP's full statement after the jump. 

 
AHIP Statement on Premium Increases
Ignagni: “It’s time to stop the politics of vilification.”
 
Washington, D.C. – America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni today released the following statement regarding premium increases:
 
“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.
 
“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.  If reform doesn’t address these pieces, it will not solve the serious problems that individuals, families, and employers face. That is why health plans have proposed fundamental reform of health insurance markets and a long-term strategy to reduce rising health care costs.
 
“Health insurance premiums are increasing in the individual market because of soaring medical costs and because younger and healthier people are dropping their coverage due to the economy.  In 2009, according to a report from the Department of Health and Human Services’ Centers for Medicare and Medicaid Services released on January 5th, rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago.  At the same time, the portion of premiums that went towards health plans’ administrative costs and profits declined for the second year in a row.”
 
Facts about rising health insurance premiums
 
    •    In every state, health plans have to provide actuarial justification for any premium increases.
 
    •    Federal government data confirms that rising health care costs are driven by increased spending on hospital care, physician services, and prescription drugs.
 
    •    AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. These factors include:
    •    sharp increases in provider rates;
    •    increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients;
    •    an increase in uncompensated care costs;
    •    consolidation among hospitals and other health care providers;
    •    a wide range of new state laws, including benefit mandates, regulations, and premium taxes; and
    •    economic factors that have caused some people to drop coverage resulting in a risk pool that is more heavily weighted with older, less healthy persons.
 
    •    According to National Health Expenditure Accounts, health plan administrative costs have fallen over the past two years from 12.8% in 2006 to 12.5% in 2007 to 11.7% in 2008.  (See Table 12)
 
Facts about health plan profits

    •    Fortune 500 puts the health plan industry profits at 2.2%, 35th on its list of profits by industry sector.  This is belowother sectors of the health care industry. 
 
    •    According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11%.  Using the same index, health plans have a 3.4% net profit margin.

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America’s Health Insurance Plans – Providing Health Benefits to More Than 200 Million Americans

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