Fix Health Care Costs To Lower Insurance Rates, Obama Advised

NU Online News Service, March 4, 3:38 p.m. EST

WASHINGTON–Health insurance premiums are driven by health care costs that must be addressed before premiums can be brought under control, health care industry executives told the President today.

They made their point at a White House meeting attended by President Obama, other administration officials and state insurance regulators.

The executives were responding to a request by Health and Human Services Secretary Kathleen Sebelius to post on the Internet the justification for their requests for large rate hikes.

Wellpoint has been under particular scrutiny, since its Anthem Blue Cross subsidiary in California recently announced plans to boost individual insurance premiums in California by as much as 39 percent.

These requests for high increases, up to 39 percent, are aimed primarily at the small and individual markets.

At the meeting, in comments via conference call after the meeting, and in a letter sent by their trade group, American Health Insurance Plans, the company's chief executives also cautioned that restraining the cost of health insurance premiums without working to control costs would impact the solvency of the companies.

Angela Braly, chairman, president and CEO of WellPoint Inc., said during the conference call that she stated during the meeting "that the administration must understand that rates can't be looked at independently from what the drivers of increases in health care costs are."

Officials of Aetna and Cigna also attended the meeting.

"You can't limit rate increases and not look at underlying costs," said Ms. Braley. "If you don't have the right rates, you will also have a problem with the solvency of health insurers" not only now, "but in the future."

Ms. Braly and Stephen Hemsley, president and CEO of United Health care, noted that these costs are driven by the hospitals, the pharmaceutical industry and the medical device industry, all of which have higher profit margins than the 2.2 percent profit rate earned by health insurers last year.

"We think we got those attending the meeting to acknowledge that fact," Mr. Helmsley said.

In a letter sent to Ms. Sebelius yesterday, Karen Ignagni, president and CEO of AHP, cited Yahoo! Finance's latest analysis of quarterly financial data, which "shows the average profit margin in the health insurance industry is 3.4 percent, compared to 11 percent for the entire health care sector."

At the meeting, Ms. Sebelius told the executives that the kind of rate increase Anthem asked for is "just unacceptable and unsustainable."

She said the industry is "making healthy profits," something the industry executives disputed.

She added that, "At least the bright spotlight may help to discourage some of these wildly exorbitant increases from occurring."

During a short stay at the meeting, the President underscored the point that such rate hikes can't go on forever. The president has painted a bleak picture of spiraling costs and eroding coverage if Congress fails to pass his plan.

In their comments during the conference call, Ms. Bray and Mr. Helmsley took note of the proposed Federal Rate Review Board that the administration wants to set up that would have the authority to roll back high rate increases.

"Health care is very local," Mr. Helmsley said. State regulators are in the best position to "strike the appropriate balance between solvency and actuarially sound rates," he advised.

Moreover, he said, "state regulators are in a better position to "focus on consumer protection."

But state regulators attending the meeting supported the idea of a Federal Rate Review Board, which they said is aimed only at providing authority to state regulators who don't have a legal mandate to act to reduce high rate increases.

"State regulators are best positioned to perform rate review and many of us do so with great success," said Jane L. Cline, NAIC president and West Virginia Insurance Commissioner.

"Some, however, have not been given the authority by their state legislatures to review and deny unjustified increases," Ms. Cline said.

"We believe that a federal backstop could help encourage these legislatures to provide that authority," she said.