HHS Challenges Health Insurer Rate Increases

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September 13, 2010

524 words

HHS challenges health insurer rate increases

R.J. Lehmann

HHS Secretary Kathleen Sebelius threatens that insurers seeking "unjustified" increases could be shut out of the health insurance exchanges in 2014.

U.S. Health and Human Services Secretary Kathleen Sebelius is calling on health insurers to cease "misinformation and unjustified rate increases" that blame provisions of the Affordable Care Act for rising 2011 premiums.

In a Sept. 9 letter to Karen Ignagni, president and CEO of America's Health Insurance Plans, Sebelius said she wanted "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."

"Later this fall, we will issue a regulation that will require state or federal review of all potentially unreasonable rate increases filed by health insurers, with the justification for increases posted publicly for consumers and employers," Sebelius wrote. "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."

Sebelius acknowledged in her letter that the law includes new benefits that will take effect Sept. 23. Among them are requirements that all plans must have no lifetime limits and no rescissions except in cases of fraud, while also requiring they offer coverage to adult children up to age 26. New plans also will be required to offer coverage of preventive services with no cost sharing, access to obstetric and gynecological services without referrals and access to out-of-network emergency room services. The plans must also have no annual limits on coverage, no pre-existing condition exclusions for children and a strengthened appeals process.

But Sebelius argued there should be only "minimal" impact from the new consumer protections, which HHS estimates would be no more than 1% to 2%. She cited analysis by the Urban Institute estimating 1% to 2% increases in premiums and from Marsh & McLennan Cos. Inc.'s Mercer Inc. estimating a 2.3% increase. A recent Wall Street Journal report cited rate hikes of between 1% and 9% requested by a number of insurers to pay for new benefits required under the law.

Aetna Inc. has reportedly requested increases on policies sold in the individual market of 5.4% to 7.4% in California and 5.5% to 6.8% in Nevada. Regence Group's Regence BlueCross BlueShield of Oregon said the additional benefits required under the health care law accounted for 3.4 percentage points of the 17.1% increase it is seeking for a small group plan. Centene Corp.'s Celtic Insurance Co. unit blamed the mandates for about half of the 18% rate increases it is seeking in Wisconsin and North Carolina.

"Any premium increases will be moderated by out-of-pocket savings resulting from the law," Sebelius wrote. "These savings include a reduction in the 'hidden tax' on insured Americans that subsidizes care for the uninsured. By making sure insurance covers people who are most at risk, there will be less uncompensated care, and, as a result, the amount of cost shifting to those who have coverage today will be reduced by up to $1 billion in 2013."

September 17, 2010