Health plans respond to Obama administration's warning on premiums

The main health insurance lobby reacted strongly Thursday afternoon after the Obama administration called on health plans to stop "misinformation and scare tactics" about the healthcare reform law.

The administration's letter to America's Health Insurance Plans comes after several health plans told customers that they were raising rates in part because of the new reform law. In it, Health and Human Services Secretary Kathleen Sebelius warned: "I want AHIP's members to be put on notice: the Administration, in partnership with states, will not tolerate unjustified rate hikes in the name of consumer protections."

"Health insurance premiums are increasing because of soaring prices for medical services, the impact of younger and healthier people dropping their insurance during the weak economy, and additional benefits required under the new law," AHIP President and CEO Karen Ignagni responded in a statement. "The new health care reform law mandates that health insurance coverage include a wide range of new benefits beyond what many families and small businesses previously purchased. It's a basic law of economics that additional benefits incur additional costs, and the impact on premiums depends on the type and amount of coverage policyholders had before. Health plans will continue to do everything they can to incorporate all of these new benefits while keeping health care coverage as affordable as possible for families and employers."

Sebelius acknowledged that the new law will cause an increase in premiums, albeit "minimal."

"According to our analysis and those of some industry and academic experts, any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal," she writes. "We estimate that that the effect will be no more than one to two percent."

Excessive premium hikes, Sebelius warns, will not be tolerated.

"We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014. Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections."