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Sebelius Talks Tough to Insurers, Needs to Take Action

Cora Nucci, for HealthLeaders Media, September 15, 2010

Insurers that "unjustifiably" raise premium rates may be deemed ineligible to participate in health insurance exchanges come 2014, says Department of Health and Human Services Secretary Kathleen Sebelius.  The insurance industry is an easy target to blame for rising healthcare costs and Sebelius is piling on. Whether she can bend the industry to her will and clamp down on rate hikes remains to be seen.

While the administration is fiddling, the public sees some private health insurers  racking up billions in surplus funds, beefing up  executive compensation packages, and raising premium  rates "unjustifiably" whatever that means, exactly.

In her letter to America's Health Insurance Plans CEO Karen Ignagni last week, Sebelius noted that the Affordable Care Act should result in a minimal impact on premiums for most Americans— about 1% or 2%.   Furthermore, she wrote, health costs have stabilized, and employers' premiums for family coverage increased by only 3% in 2010, a figure confirmed by Kaiser Family Foundation 2010 Employer Health Benefits Survey.

The secretary sounded tough:  "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." But she sounds more like an advocate for an angry rabble than like a force for real change. If she means business, Sebelius will have to back up her words with actions.

She could start by defining what she means by "unjustifiable" rate hikes.

WellPoint, Inc., for example wanted premium pay hikes of as much as 39% on California policyholders last spring, but  Sen. Dianne Feinstein (D) called on the company to back down. Days later Wellpoint withdrew its request for the increase, and in August regulators approved a 14% increase.   I don't know on what basis 39% was determined to be the right amount.  But I am familiar with the tactic of asking for more than you're willing to settle for in order to leave room for negotiation.

Comments are moderated. Please be patient.

3 comments on "Sebelius Talks Tough to Insurers, Needs to Take Action"


Bogey (9/16/2010 at 7:03 PM)
Are you kidding? This is the senior online editor for HealthLeaders Media? And this is the best this publication can do for experienced commentary? -First of all, does the author know that WellPoint admitted to errors in the initial rating for some California individuals, lowered the rate request, and then under state pressure in California lowered it further, projecting a $100 million annual loss in the state? -Second, when she says she's "familiar with the tactic" of asking for more and settling for less, what industry is she referring to? Is she new to the insurance field? As most brokers know, there is the required rate increase (or decrease in some cases – yes, I've seen them!) based on the specific individual/group demographics, then there are plan benefit changes that can be made to reduce that premium. -Thirdly, to her comment that a 1% or 2% rate hike by 2014 "could be well off the mark," is she serious? Could? What world does she live in? The PPACA changes from 9/23 alone are driving rates up substantially, and these aren't the major drivers that the 2014 changes will bring, which may be enormous – some say up to 200%~300% or more for some age groups. -And finally, is she being candid when she reflects that "inflation" or "cost of living increases" are reasonable benchmarks to adjust rates, rather than the cost of care? It's the cost of care, stupid! to rephrase a winning slogan the 42nd president used in his winning campaign. Unless we are willing to look at the facts and reality of the high and increasing cost of care, coupled with the enormous impact of ObamaCare, we are not seeing things as they are and will be unless there is substantial change to the course we are on today with health care reform under this administration. If this kind of feckless commentary is indicative of the quality of HealthLeaders, we're in trouble.

Todd (9/15/2010 at 2:28 PM)
So lets see, on average Medicaid reimburses hospitals about 20% below cost. And the healthcare reform act significantly increases Medicaid eligibility and hospitals make up for the government healthcare shortfall through private payers. Not to mention the adverse selection insurers will incur. And Sebelius says premiums will only rise 1-2%! What a joke. This is exactly the type of preying upon the ignorance of Americans by propagating misleading information that this country cannot afford.

JoeAccounting (9/15/2010 at 1:47 PM)
I dont disagree with the author, but I give Ms. Sibelius the credit for starting the discussion.