HHS Secretary Kathleen Sebelius on Thursday criticized what she termed the "shocking" and "skyrocketing" proposed individual coverage rate hikes in seven states, from 23% in Maine to 56% in Michigan.
Touting healthcare reform, Sebelius unveiled a new report, Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System, which she said pinpointed "wildly excessive" profits among the country's largest insurers and the lack of competition that will "lock people out and throw them out of the marketplace."
Premium rate increases have left thousands of families struggling in a recession "with an unpleasant choice between fewer benefits, higher premiums or having no insurance at all," Sebelius said at a news conference in Washington D.C.
The insurance industry fired back.
"It's time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation," said Karen Igagni, America's Health Insurance Plans President and CEO, in a statement.
Daniel J. Loepp, president and CEO of Blue Cross Blue Shield of Michigan, wrote a letter to Sebelius after she spoke to the press, saying he was "disappointed" that Sebelius simply mentioned the company's proposal to raise rates by 56%.
"Without context, the story is not complete," he wrote. "Our regulators granted us a 22% increase last year after lengthy negotiations. Despite that granting of the increase, BCBSM sustained losses on individual lines of business of $280 million in 2009."
Sebelius took the opportunity to again push for health reform plans a week before the bipartisan summit called to salvage the teetering legislative plan.
Sebelius has been a key mouthpiece for the administration, a week ago lambasting Anthem Blue Cross after the insurer announced plans to raise rates on its customers in California as much as 39%. Sebelius criticized Anthem's move partly in light of its parent company, WellPoint, taking in a profit of $2.7 billion in the previous quarter. Following her initial criticism, Anthem Blue Cross postponed the rate hikes until May 1.
Chastising insurance company profits, Sebelius said "recent economic data show that profits for the 10 largest insurance companies increased 250% between 2000 and 2009, 10 times faster than inflation."
She targeted individual insurance premium increases. Sebelius called individual insurance the "most vulnerable part" of the health insurance marketplace. Less than 10% of Americans are covered by individual plans, according to HHS.
In response to Sebelius' criticism, AHIP cited medical cost increases as the prime culprit in increasing insurance costs in the individual market.
"Health insurance premiums are increasing in the individual market because of soaring medical costs and because younger and healthier people are dropping their coverage due to the economy," Igagni said. "Increases in the cost of coverage in the individual market spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system."
Rejecting the claims of medical costs, however, Sebelius said, "While rising healthcare costs is a known problem with our broken healthcare system, some of the premium increases requested by insurance companies are five to 10 times larger than the growth rate in national health expenditures. All the while, insurance companies and their CEOs continue to thrive."
While in a recession last year, the nation's five largest insurance companies?WellPoint, UnitedHealth Group, CIGNA, Aetna, and Humana?took home profits of $12.2 bilion, up 56% over 2008. The CEOs of the five largest insurers were each compensated up to $24 million in 2008, Sebelius said.
With proposed healthcare reform, "insurance companies will have to report how they spend the premium dollars that they collect from their customers," Sebelius said.
Sebelius also cited insurers in seven states that are proposing premium rates hikes. Besides the California and Michigan proposed hikes, she cited proposed increases by Anthem of Maine (23%;); Regency Blue Cross Blue Shield of Oregon (20%); and UnitedHealth, Tufts, and Blue Cross (16 to 23%) in Rhode Island. She said individual rates increased in Washington state by 40% until it imposed stiffer premium regulations.
The proposed Michigan rate hike of 56% was the highest that Sebelius cited. The figure was accurate as a proposal, but never carried out, according to Michigan Blue Cross Blue Shield.
"We are the insurer of last resort and seeing an influx into the individual market." says Andrew Hetzel, vice president for corporate communications for Blue Cross Blue Shield of Michigan. "Everything about our business is what Congress is talking about what it should be. Unfortunately, our plan is lumped into this political discussion and it's not helping the debate. It's emotional and angry and it doesn't lend itself to careful consideration and analysis of the real problems."
Joe Cantlupe is a senior editor with HealthLeaders Media Online.
