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Industry executives were grilled at congressional hearings and summoned to a White House meeting called by Health and Human Services (HHS) Secretary Kathleen Sebelius to discuss rising premiums
NATIONAL REPORTS-Congressional leaders stepped up their campaign against health insurance plans last month. Industry executives were grilled at congressional hearings and summoned to a White House meeting called by Health and Human Services (HHS) Secretary Kathleen Sebelius to discuss rising premiums with HHS and state insurance regulators.
Health insurance CEOs explained that they earn comparatively low profit margins and blamed rising rates on higher charges from hospitals, doctors and makers of drugs and medical products, among other things.
President Barack Obama expressed skepticism of those claims. As evidence that the current system is unsustainable, Obama read a letter from an Ohio cancer survivor who faces a 40% premium increase that she can't afford.
There is concern, said WellPoint CEO Angela Braly after the White House meeting, that "there might be a disconnect" from setting rules in the states and prices in Washington.
Despite all the anti-insurer rhetoric from Sebelius and others, industry leaders described the meeting with her as frank and cordial.
"We had a good discussion about the need to control costs and the challenges of the individual market," Braly said.
Industry CEOs emphasized that their margins of 2.2% last year on average are among the lowest of any participants across the healthcare sector.
"I believe there have been misunderstandings across the board about profits and that a level of understanding was established," said UnitedHealth Group's president Stephen Hemsley.
The main proposal from Sebelius is for insurance companies to post information online that explains proposed rate increases as well as how much of premium revenue goes toward administrative costs and marketing, as opposed to actual medical care.
The secretary also spelled out the request in a follow-up letter to Braly and Hemsley, plus the CEOs of Aetna, Health Care Service Corp., and CIGNA. Sebelius wants the public to know the basis for company estimates of medical costs and utilization as well as the number of people receiving premium increases.
Companies could be asked to justify rate hikes by explaining the expected impact on medical-loss ratios, and the percentage of premium revenues spent on medical claims, disease management, quality measures, administrative costs, profits and executive salaries, broken down by market type.
WALKING AWAY FROM BUSINESS
The campaign to curb insurer price hikes reflects the widely held belief that insurers can dictate prices in many markets because of lack of competition. Sebelius and Obama both cited an analysis by Goldman Sachs predicting healthy growth by insurance companies because market concentration is leading to rising rates. Goldman's enthusiasm for managed care industry stocks reflects comments from employee-benefits expert Steve Lewis from the Willis organization. He reported "a drop in price competition among insurers from a year ago, as incumbent carriers seem more willing to walk away from existing business."
Another study sponsored by the American Medical Assn. blames rising premiums and copays on increased market domination by a few large insurers and urges in-depth assessment of the consequences of insurer market power. Insurers, in turn, claim that premiums are being driven up by sharp increases in hospital and physician rates, in outpatient surgery costs, in the use and cost of specialty drugs, and in higher emergency room rates.
Republicans propose to expand competition for health insurance by allowing consumers to buy coverage across state lines. Supporters of this approach claim it would offer more choices in highly concentrated markets and expand less costly options. But critics fear that insurers would escape state oversight and fail to resolve disputes.
While health reform legislation remained in limbo, members of Congress fired a salvo at insurers by enacting legislation to repeal the industry's exemption from federal antitrust laws. Backers of the House bill, which included most Republicans, claimed it would prevent insurance companies from conspiring to fix prices and block competition. But most lawmakers acknowledged that it was largely a symbolic gesture and would have little impact on current industry practices.
The exemption permits insurers to share data that helps set premiums without fear of being accused of price fixing. Insurers said the policy change could hurt small companies and, ironically, could lead to more industry consolidation. But industry is not actively opposing this change when many more critical reform proposals are on the table.