ProgramBusiness
 
  


  1. News Articles
  2. Related News Articles
  3. Comments (1)
News Article Details

Obama Administration Asks Health Insurers to Justify Rate Increases Among Soaring Profits

Source: NY Times - Robert Pear


Posted on 20 May 2011

Facebook LinkedIn Twitter Google

The Obama administration demanded on Thursday that insurers justify proposed rate increases of more than 10 percent, starting in September.

Kathleen Sebelius, the secretary of health and human services, issued a final rule establishing procedures for federal and state insurance experts to scrutinize premiums. Insurers, she said, will have to justify rate increases in an environment in which they are doing well financially, with profits exceeding the expectations of many Wall Street analysts.

“Health insurance companies have recently reported some of their highest profits in years and are holding record reserves,” Ms. Sebelius said.

“Insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, but many insurance companies continue to raise their rates. Often, these increases come without any explanation or justification.”

Federal health officials proposed the 10 percent threshold in December. The insurance industry criticized it as an arbitrary test that could brand a majority of rate increases as presumptively unreasonable. But the administration rejected the criticism and insisted on the 10 percent standard in the final rule, issued Thursday.

Starting in September 2012, the federal government will set a separate threshold for each state, reflecting trends in insurance and health care costs.

In some states like New Hampshire, groups of more than 20 workers have experienced premium increases of around 20 percent this year, while smaller groups have seen increases of 40 percent or more. At the same time, insurance agents say, coverage is shrinking as deductibles have increased and insurers limit the choice of hospitals.

To ensure that “consumers get value for their dollars,” the new health care law required annual reviews of “unreasonable increases in premiums.”

Under the new rule, federal and state officials will review rates in the individual and small-group insurance markets. In effect, the administration said, large employers can take care of themselves, as they are more sophisticated purchasers and have more leverage in negotiating with insurers.

Federal officials acknowledged that they did not have the authority to block rates that were found to be unjustified. But they said many states had such authority, and the federal government is providing $250 million to states to strengthen their capacity. A small number of states, opposed to the federal health care law, have turned down the money.

The new rule says a rate increase is unreasonable if it is excessive, unjustified or “unfairly discriminatory.” An increase is deemed excessive if it is “unreasonably high in relation to the benefits provided.”

Consumer advocates generally welcomed the rule. “The days of insurance companies running roughshod over consumers and jacking up rates whenever they want are over,” said Ethan S. Rome, executive director of Health Care for America Now, a coalition that includes labor unions and civil rights groups.

Insurers said the rule did nothing to address the underlying costs of health care, which they described as the main factor driving up premiums.

“If we believe health care costs are crushing the economy, we ought to have a debate about how to bring costs under control,” said Karen M. Ignagni, president of America’s Health Insurance Plans, a trade group. “Focusing on premiums diverts attention from that debate.”

In many cases, Ms. Ignagni said, rate increases of more than 10 percent may be justified by rising health costs and the tendency of younger, healthier people to drop coverage, forcing up costs for other policyholders.

States will have the primary responsibility for reviewing rate increases. “But if a state does not have the authority or the resources to conduct a review, our department will step in,” said Ms. Sebelius, a former state insurance commissioner in Kansas.

Under the rule, as part of an effective rate review program, states must have “a mechanism for receiving public comments” on proposed rate increases.

Elizabeth P. Sammis, the acting insurance commissioner in Maryland, said this would be a big change. In many cases, she said, consumers learn of premium increases when they receive notices in the mail, and then they call the commissioner’s office to ask, “Why are rates going up?”


Comments

 
Jim Moore May 20 2011 10:44AM Report Abuse
What idiots. If you mandate additional coverage it is going to cost more money. No investigation needed.
Post a Comment
If you are a Storefront / Tradingfloor user, click here to login.
Note: As a guest user, please fill out the form below to post a comment.
Post your comments here.
Name :
Email Address :
Captcha :
Comments :
Character left : 2000