Sebelius Cautions Insurers on Rate Hikes

In a sternly worded message to health insurers, Health and Human Services Secretary Kathleen Sebelius said last week that the federal government will not "stand idly by as insurers blame their premium hikes and increased profits" on changes related to the new healthcare reform legislation.

With the announcement this month by several insurers that they were sharply raising their 2011 premiums in light of anticipated costs under new healthcare reform measures, Sebelius said in a letter to Karen Ignagni, president and CEO of America’s Health Insurance Plans that HHS will be keeping track of those insurers. Those plans—or others that have "a record of unjustified rate increases"—could be excluded from health insurance exchanges when they begin operating in 2014, she said.

HHS will issue a regulation this fall 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 added.

The HHS letter comes on the heels earlier in the day of a release of a study from Centers for Medicare and Medicaid Services economists that healthcare cost increases may be slightly higher under healthcare reform provisions. Earlier estimates from sources such as the Urban Institute and Mercer, Sebelius said, have indicated that the impact of reform measures "will be no more than 1% to 2%."

"The trends in health costs, independent of the legislation, have slowed. Employers’ premiums for family coverage increased by only 3% in 2010—a significant drop from previous years," she said.

Ignagni says that health insurance premiums were increasing for next year 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."

The new healthcare reform law now requires that health insurance coverage include a wide range of new benefits "beyond what many families and small businesses previously purchased," Ignagni said. "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."

She added that health plans, while incorporating new benefits, will be trying to keep “healthcare coverage as affordable as possible for families and employers.”

Any premium increases should be "moderated by out?of?pocket savings resulting from the law," Sebelius says. These savings include a reduction in the "hidden tax" on insured Americans that subsidizes care for the uninsured, she added.

By making sure insurance covers those most at risk, less uncompensated care will be anticipated and therefore "the amount of cost shifting to those who have coverage today will be reduced by up to $1 billion in 2013," Sebelius says.