Sebelius Talks Tough to Insurers, Needs to Take Action

Cora Nucci, 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.

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